Asos PLC (LON:ASC) is “turning the corner” after a year of disruption and is likely to have successfully navigated Black Friday, analysts at HSBC said as they upgraded the online clothes retailer.
HSBC, which tried on a new ‘buy’ rating for size following its previous ‘hold’, said positive updates from rivals Boohoo and Zalando “suggest that online apparel has performed well” over the important recent weekend that culminated with Cyber Monday.
READ: ASOS expected to “go hard” into Black Friday but has “a lot to prove” this Christmas, says Peel Hunt
Although Asos has not issued a pre-Christmas update as many of its peers have, this was the same as last year, the bank’s analysts observed in a note to clients on Tuesday.
Asos also entered the period with a stronger promotional campaign compared to last year and in the absence of negative a repeat of the capacity issues that led it to stumble last year, “there is an increased likelihood that Asos will deliver an in-line performance”.
The analysts' belief that the retailer is turning the corner is based on the "best-in-class online capabilities" shown from its track record in the UK, allied to a "significant" international potential in Europe and the US.
"However the ability to export this model has been impacted by simultaneous warehouse transitions in Europe and the US that did not go according to plan, and deflected management focus away from core product and customer engagement capabilities."
HSBC feels management has made much progress in resolving a number of issues with software and search engine optimisation, though directors feel there is still plenty to do.
With the shares having pulled back, the new price target of 3,615p, upped from 3,560p, offers a fair wodge of upside.