Boohoo share price: stock could slump by ~15% if this happens

Boohoo (LON: BOO) share price is sitting at an important support level as concerns about the company continue. The stock was trading at 38p on Wednesday, a few points above the key support point at 37.35p, the lowest point since May 10th. In all, the stock has plunged by over 38% from its highest level this year.

Concerns about Boohoo remains

Boohoo and other British online retail companies like Asos and The Hut Group are going through a major downturn as demand wanes. As I wrote in this article, Asos is on the verge as its stock plunged by more than 92% from its highest level on record. Some suppliers have stopped selling with the company, fearing losses.

The most recent results showed that the company’s revenue in the 12 months to February came in £1.78 billion, which is 11% from the previous period. Gross profit plunged by 13% to £895 million while its loss for the year jumped to over £90.7 million,

Despite all this, the company expressed optimism that its business was improving. In a statement supporting this move, the company’s CEO John Lyttle said:

“Our confidence in the medium-term prospects for the group remain unchanged, and as we execute on our key priorities we see a clear path to improved profitability and getting back to double-digit revenue growth.”

Boohoo believes that its revenue will be between flat and a decline of 5%. It also sees its revenue for the first half of this fiscal year will drop by between 10% and 15%. There is a likelihood that the company’s performance will be below these estimates. 

For one, the most recent data shows that holiday sales grew at the slowest level in seven months. Sales in the UK rose by 3.9% in May, below the three-month average of 5.1%. On a positive side for Boohoo, the number of Boohoo.com website visitors jumped to 18.3 million in May from 17.7 million in the previous month.

Boohoo share price forecast

BOO chart by TradingView

BOO stock price has been in a strong bearish trend after peaking at 60.86p on March 31st this year. The 25-period and 50-period exponential moving averages (EMA) have formed a bearish crossover pattern. It is now sitting at a key support level, where it has failed to move below the key support at 37.35p, where it has failed to drop below since May 10th.

Therefore, a breach below this level will signal that the stock will have a bearish breakout to the next support at 32.50p, the lowest point in December last year. This price is about 15% below the current level.