Boohoo (LON: BOO) share price collapsed to the lowest level on record after the company published weak results. The stock dropped to a low of 30.27p, bringing its total market cap to about £416 million, which is much lower than its all-time high of over £4 billion.
At its peak, Boohoo was one of the best-performing technology companies in the UK. Recently, however, the company has come under intense pressure as demand has fallen and the cost of doing business has jumped.
On Wednesday, the company published weak results and warned that the situation may not improve any time soon. Its revenue in the first half of the year crashed by 10% from £975.9 million to £882 million. As the cost of doing business rose, the company’s gross profit crashed by 13% to £463 million. Its adjusted EBITDA fell by 58% to just £35.5 million.
In its statement, the firm said that it will continue to focus on three key pillars: sourcing, inventory management, and overheads. It also reiterated that it was in a strong financial situation with over £315 million in gross cash and just £10 million in cash. Therefore, it has a net cash of about £305 million compared to a market cap of £416 million, which is a good thing.
However, the company warned that its business was facing substantial risks this year as inflation bites and consumer confidence wanes. It, therefore, expects that its EBITDA margins will be between 3% and 5% compared to the previous range of between 4% and 7%. The statement said:
“By focusing near term on optimizing its operations, the Group will be well-positioned to improve future profitability and financial performance through self-help via delivery of key projects and cost efficiencies and through easing of macro-economic headwinds facing both consumers and businesses.”
So, what next for the Boohoo share price? The reality is that Boohoo is in a difficult place as inflation rises, demand slows, and competition escalates. This could weigh on the stock. However, in the long term, there is a likelihood that the stock will bounce back as the company implements a turnaround strategy.
Boohoo share price forecast
In my article on Boohoo in May, I warned that the stock will likely continue falling. The weekly chart shows that the Boohoo stock price has been in a strong bearish trend in the past few months. Any pullbacks have been met with stiff resistance. As a result, the stock has crashed below all moving averages while the Awesome Oscillator has formed a bearish divergence pattern.
Therefore, the near-term outlook for the stock is bearish and it could crash to 20p. In the long-term, Boohoo will likely bounce back and retest the resistance at 50p.