Asos share price: RBC trims stance on retailer after profit warning

Written by: Alice Young
March 11, 2020

RBC Capital Markets has trimmed its rating on Asos (LON:ASC), pointing to uncertainty shadowing the stock in the wake of the group’s profit warning, WebFG News has reported. The move comes after the online retailer trimmed its sales growth and EBIT margin guidance earlier this week, pointing to ‘significant deterioration’ in trading.

Asos’ share price, which tanked nearly 40 percent on Monday, is again under pressure today. As of 10:41 GMT, the shares were changing hands 4.89 percent in the red at 2,470.28p.

RBC trims stance on Asos

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RBC has lowered its rating on Asos from ‘top pick’ to ‘outperform’ today, further lowering its price target on the stock from 7,700p to 3,200p. WebFG News quoted the analysts as saying that they had underestimated the retailer’s vulnerability to a more promotional market. The bank is further reducing its estimates by 55-60 percent to reflect the ‘new reality,’ while noting that having assessed the risk/reward ratio, it was compelled by the opportunity created by Asos’ current share price.

“The industry backdrop has significantly deteriorated in 2019, and despite its structural tailwinds, Asos is evidently not immune,” the broker pointed out, adding that it, however, continued to “believe that its industry-leading proposition […] and pace of innovation will enable Asos to continue taking share in its large addressable market”.

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Analyst ratings update

The 22 analysts offering 12-month price targets for Asos for the Financial Times have a median target of 4,039.50p on the shares, with a high estimate of 8,300.00p and a low estimate of RBC lowers rating and price target on 2,468.00p. As of December 18, the consensus forecast amongst 29 polled investment analysts covering the blue-chip group has it that the company will outperform the market.