Shares in online fashion retailer Boohoo.com PLC (LON:BOO) have lost almost 30% since last summer’s highs and Citi bank reckons they’re now worth a punt.
Analysts at the bank’s London branch previously felt the stock was too pricey but think the shares now “better reflect downside risk on margins as [the] company invests for long-term growth”.
READ: Boohoo reports record revenues after best ever Black Friday
As is the way for a lot of growth companies, Boohoo has reached a point where it is beginning to outgrow its current production and distribution facilities due to its rising popularity.
Citi’s Dan Hofman said the market wasn’t taking into account just how much the AIM giant needed to reinvest, although he believes consensus estimates are now more reasonable.
He has trimmed future years’ pre-tax profits forecasts by between 6% and 9% “to better capture planned reinvestment in all group brands”.
READ: Boohoo.com drops amid margin pressures as it raises full-year revenue outlook again as first-half profits surge
Speaking of brands, Hofman really likes the potential of PrettyLittleThing and Nasty Gal, as evidenced by their massive social media reaches.
“On Instagram and Youtube, PrettyLittleThing has greater than twice the engagement of ASOS or Boohoo brands, highlighting that sales have yet to scale to potential and underpinning near term growth forecasts. Nasty Gal has similar social media presence as PLT despite 1/6th of the sales base.”
The analyst has upgraded Boohoo to a ‘buy’, with a price target of 235p.
On Tuesday afternoon, shares fell 2.2% to 181p.