Shares in online clothing flogger ASOS PLC (LON:ASC) are starting to look cheap, reckons Credit Suisse.
The stock has fallen around 7% in the last three months, prompting the Swiss bank to abandon its bearish positive and advocate holding on to the shares.
READ: UK online fashion retailer ASOS invests in USA where sales are growing
The price target moves from 5,300p to 5,600p – the shares currently trade at 5,762p – even though Credit Suisse (CS) has trimmed its forecasts by around 2% for the current financial year (to February 2018) and next year, to take into account foreign exchange projections.
CS remains cautious on ASOS’s ability to leverage its fulfilment costs in the medium term, given the company’s logistics model and the investments needed to maintain deliveries, but cheap is cheap, and the shares are 14% below their recent peak.
The valuation premium versus ASOS’s peers is now at its lowest in a year.
READ: ASOS expects to reach top end of sales growth guidance this year after solid trading update
CS expects active customer growth to remain healthy this year at more than 20% year-on-year, though this would represent a slow-down on last year.
The launch of ASOS active wear and beauty categories should put some extra vim in sales performance, but any acceleration of the industry shift to same-day delivery and any further strengthening of the pound remain key risks.