Boohoo share price analysis: where fundamentals meet technicals

By:
on Apr 21, 2023
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  • Boohoo stock price has jumped by double-digits this year.
  • The company’s fundamentals are slowly improving.
  • Technicals point to a rising wedge, which is a bearish sign.

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UK stocks have done well this year, with the FTSE 100 rising by ~6% this year and by ~18% above the lowest point in 2022. The index is nearing an all-time high of £8,050. Boohoo (LON: BOO) share price has not been left behind in this rebound after rising by 60% this year.

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Is the tide turning?

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Boohoo has gone through a rough patch in the past few years. The problem started when the company was accused of mistreating its workers in Leicester. While Boohoo has solved most of its challenges, the company has never recovered.

Boohoo also faced the challenge of weak sales growth as the Covid-19 pandemic ended. Also, the firm faced substantial competition from the likes of Shein. And like tech firms like Zoom, the company suffered as investors rotated from lockdown stocks.

Boohoo’s revenue and profitability growth has disappointed. Its most recent results showed that the total revenue dropped by 11% to over £637.7 million in the four months to December.

Now, it seems like the tide is turning in favor of Boohoo. For example, the prices of key raw materials like cotton has dropped sharply in the past few months. Also, prices of logistics has dropped sharply, as I wrote in my article on ZIM Integrated.

At the same time, UK’s inflation remains stubbornly high, thanks to food and energy prices. Therefore, as a merchant of relatively cheaper products, Boohoo could benefit as buyers look to save costs. Other similar companies like H&M recently reported a jump in Q1 profits as these trends continued.

Further, the company is expected to save costs now that its main distribution center in Sheffield has been launched. Also, Boohoo has reduced its inventories,which affected its profitability.

Another possible catalyst for Boohoo shares is that it could be acquired. Earlier this week, one of the biggest retail news was that Apollo Group announced that it would buy THG.

Boohoo share price forecast

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BOO chart by TradingView

As mentioned, I believe that Boohoo stock price has more upside. However, technicals paint a difficult path to this recovery. As shown, the shares have formed a rising wedge pattern that is shown in black. In price action analysis, this pattern is usually a bearish sign. 

The shares have moved slightly below the 25-day and 50-day exponential moving averages. Therefore, there is a likelihood that the stock will pull back slightly to the key support level at 45p. 

So, with technicals and fundamentals diverging, you should watch the key resistance point at 60.72p, the highest point this year.

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