Home Stock Asos share price forecast: relief rally likely ahead of earnings

Asos share price forecast: relief rally likely ahead of earnings


The Asos (LON: ASOS) stock deep sell-off accelerated on Monday as investors wait for the company’s full-year results scheduled for Thursday this week. The stock tumbled to a low of 2,300p, which was about 61% below its year-to-date high.

Asos sell-off gains steam

Asos is a major fashion retailer in the UK that mostly caters to young adults, mostly women. The company sells clothing and accessories through its website, apps, and a select number of physical stores.

The Asos share price has been among the worst performers in London this year. The weakness accelerated a few months ago when the company published weak results and guidance. It cited the ongoing supply chain issues and shortages for the weak guidance.

Unfortunately, things have not changed since the company published its previous results. Supply shortages have worsened while the cost of shipping goods from countries like China has jumped substantially.

The company faces other challenges. For example, the price of key commodities has surged, with cotton jumping to a ten-year high. This means that the company will continue experiencing thin margins.

The Asos share price will be in focus this week as the firm publishes its final results for the year that ended in August. The preliminary results showed that the company’s revenue jumped to more than 3.9 billion pounds while its profit before tax rose to 177 million pounds. 

Analysts are generally bullish about Asos stock price. For example, those at JP Morgan expect that it will jump to more than 6,000p while those at UBS, Royal Bank of Canada (RBC), and Goldman Sachs expect it to keep rallying. 

Notably, Asos is not the only UK fashion house struggling. In the past few weeks, the Boohoo share price has collapsed to the lowest level in months.

Asos share price forecast

The daily chart shows that the Asos share price has sold off substantially in the past few weeks. As a result, it has dropped below the 25-day and 50-day moving averages (MA). It is also along the lower line of the Bollinger Bands while the Relative Strength Index (RSI) has moved to the oversold level. 

Therefore, while the path of least resistance is lower, there is a possibility that it will have a relief rally in the coming days. Besides, investors have priced in more weakness of its business.

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