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ASOS upped to ‘hold’ as Liberum says fashion firm catching up on lost ground

Liberum said the company’s lower return rate had been a key driver of ASOS’s recent stronger trading, however, they said it was “unlikely to remain this attractive in the future as consumer return to usual shopping patterns"

ASOS PLC - ASOS upped to ‘hold’ as Liberum says fashion firm catching up on lost ground

ASOS PLC (LON:ASC) has been upgraded to ‘hold’ from ‘sell’ by analysts at Liberum, with several other analysts also upping their share price targets, as the online clothing retailer was said to be “making up for lost ground” following the second upgrade to its profit forecasts in a month.

In a note on Thursday, the broker also upped its target price to 5,000p from 2,450p, saying after a strong share price rally the stock was now “up with events”, although they questioned how sustainable the company’s margins will be going forward.

READ: ASOS in fashion as it upgrades profit forecasts following stronger demand

Liberum said the company’s lower than expected return rate had been a key driver of ASOS’s stronger trading, however, they said it was “unlikely to remain this attractive in the future as consumer return to usual shopping patterns, buying more for going out, where the perfect design/fit matters, rather than for staying in”.

“ASOS is starting to get back to the territory it commanded in 2018 before its string of profit warnings. While the group has done a good so far…It remains unclear how much will “stick” in [the 2021 financial year]”, the broker said.

In a trading update yesterday, ASOS said sales and profits for its full-year are now expected to be “significantly ahead of market expectations” due to “stronger than anticipated underlying demand” for its clothing lines.

Revenue growth for the full year is now expected to be between 17%-19% with pre-tax profit in the region of £130mln-£150mln.

Elsewhere, Berenberg upped its estimates for earnings per share by 107%, 16% and 13% for the current and coming two years, and its marked up its price target to 5,700p from 4,400p.  

Over at Peel Hunt the price target was lifted to 6,500p from 5,000p; at Societe Generale the analysts upped their target to 5,122p from 4,309p, while at Goldman Sachs the target was nudged up to 5,000p from 4,100p.

All four have 'buy' ratings on the shares.

Shares in ASOS rose 2.8% to 4,912p in mid-morning trading.

Quick facts: ASOS PLC

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Price: 3177 GBX

Market Cap: £3.17 billion

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