Liberum Capital has cut its stance for online fashion retailer boohoo.com PLC (LON:BOO) to ‘hold’ from ‘buy’ on valuation grounds in the wake of Tuesday’s trading update from the AIM-quoted firm.
In a note to clients, leaving their target price for boohoo unchanged at 220p, Liberum’s analysts said: “At this stage, while we acknowledge the ongoing positive momentum, we believe the shares are up with events.”
READ: boohoo.com shares drop after mixed update; sales surge due to PrettyLittleThing acquisition
They pointed out that boohoo’s first-quarter performance “has been very encouraging across all brands and geographic regions.”
The analysts added: “While it is early in the financial year, the strong momentum has continued, delivering a Q1 top line beat of 6.1% vs. consensus expectations.
“In particular, this has been driven by outperformance vs. expectations by the Pretty Little Thing brand.”
They also noted that the firm left its guidance unchanged with 35%-40% revenue growth and a 9%-10% underlying earnings (EBITDA) margin expected for full-year 2019.
The analysts said: “Operational progress is on track with infrastructure investment laying the platform for a more than tripling of sales over the medium-term.”
However, the Liberum analysts added that their reduced recommendation is also reflective of the fact that boohoo’s competition (ie. ASOS PLC (LON:ASC) and Germany’s Zalando) continue to invest in their own businesses more heavily in percentage terms.
They added that they see this as a potential threat to boohoo in the longer term at a time where the race is on to acquire new customers.