boohoo Group PLC (LON:BOO) is currently undervalued by the share price as it should trade at a premium to its peers, according to analysts at Liberum.
The broker upgraded the stock to ‘buy’ from ‘hold’, keeping the target price unchanged at 380p, as it is “satisfied” with the progress the company has made so far to fix its supply chain issues and the fast-fashion retailer’s plans for the future.
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“We fully think the company should start to see the benefits of the work it has done, the promises it has made for the future and the growth being achieved nearly doubling revenues over a two-year basis,” analysts noted.
“We believe the company has adequately dealt with the risk of any one-time financial and reputational damage from supply chain issues, albeit the job is not yet done and will need to be a continual focus from here.”
According to Liberum, the AIM giant managed the crisis with limited visible financial impact around the gross margin and at a relatively small cost, albeit taking it seriously.
“The company is not engaging in a one-time fix of the existing issues highlighted in the review by Alison Levitt QC, but is installing systems and processes that would ensure a continuous process of review and improvement,” analysts added.
Full-year sales forecasts were trimmed to 29% from 37% growth due to weaker than expected quarterly performance in markets outside the UK and US, though they are above company guidance of 25% growth.
Underlying earnings margin (EBITDA) expectations were upped to 9.5% from 8.8% previously, driven by estimates of a slightly higher gross margin benefitting from return to a more normal customer mix.
Shares were flat at 325.1p on Monday morning.