Asos share price under pressure again as Berenberg trims valuation

Written by: Tsveta van Son
March 11, 2020

Shares in Asos (LON:ASC) have fallen deep into the red in today’s session as analysts at Berenberg trimmed their valuation on the stock. The move came after the online retailer’s shock profit warning earlier in the week.

As of 13:55 GMT, Asos’ share price had given up 2.91 percent to 2,214.00p. The group’s shares have lost more than 65 percent of their value over the past year, following this week’s about 40-percent slump.

Berenberg trims valuation

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Berenberg trimmed its price target on Asos from 8,300p to 4,000p today, following the online retailer’s move to lower its sales growth and EBIT margin guidance earlier this week, citing ‘significant deterioration’ in trading. The analysts nevertheless retained their ‘buy’ rating on the shares, and WebFG news quoted the broker as arguing that while the halving of EBIT margin guidance had understandably left investors concerned about the balance sheet, it believed that the online retailer will return to being free cash flow positive next year and having net cash in FY 2021E.

The analysts elaborated that the exceptional level of discounting being seen currently was temporary, caused by excess stock across the sector following an exceptionally warm September/October and compounded by macro uncertainty.

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Lack of visibility

WebFG News further quoted the analysts as commenting that they did not expect “Asos to participate in extreme discounting (and its differentiated business and convenient customer proposition should shield it somewhat), but by not participating there is a potential near-term revenue impact”.

“As we have a lack of visibility over how long this could last, we cut our mid-term revenue forecasts as a result,” Berenberg concluded.

The comments come after RBC lowered its stance on the retailer yesterday, pointing to uncertainty shadowing the stock in the wake of the profit warning.