UBS has upped its price target for ASOS PLC (LON:ASC) as it sees its differentiated offering as a winner in the crowded online fashion space.
The price target goes up from 4,450p to 5,500p and the recommendation remains buy, with the investment case “evolving into online fast fashion and away from pure brand aggregation, albeit with a degree of edited range and product selection”.
Increasing differentiation is a smart move in UBS’s view, as it should improve the sustainability of profit by creating greater barriers to entry.
Of course, expectations have got ahead of themselves before, back in 2013, only for the share price to collapse from around £7 in early 2014 to less than two quid by October of that year, but this time should be different, UBS argues.
Even at the Swiss bank’s new price target the stock is only valued on 2.2 times projected sales for 2017, compared to Amazon’s multiple of 2.3, and the sales growth of both companies is similar.