Asos share price analysis and earnings preview: is it a bargain?

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on Oct 23, 2023
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  • Asos stock price has been in a tight range in the past few months.
  • It has already plunged by more than 95% from its all-time high.
  • The company will publish its financial results on Wednesday.

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Asos (LON: ASC) share price has moved sideways in the past few months as investors assess the company’s performance. The stock was trading at 400p on Monday, where it has been stuck at since July. This price is a bit higher than the year-to-date low of 317p. It remains over 60% below the highest level this year and by 95% from its all-time high.

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Asos earnings ahead

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Asos, the e-commerce company, has been under intense pressure in the past few years. After booming during the pandemic, the company faced numerous headwinds. Its inventories levels jumped, demand slumped, while the cost of doing business jumped.

Asos, like Boohoo, has published weak financial results in the past few years, which has contributed to the performance in the stock market. The most recent financial results showed that Asos’s group revenue dropped by 12% in the three months to September and by 10%.

Therefore, this week will be an important one for Asos as it publishes its final results for the year that ended in September. Analysts expect that its total sales growth crashed by 11.2% while its adjusted EBIT was a 24 million pound loss. They also believe that the adjusted profit before taxes was 74 million pounds.

The results will shed more light about the company’s performance this year and whether the management’s initiatives are working out. An optimistic tone will likely lead to inflows, which will have a positive impact on its business.

As part of its strategy, the company has slashed costs in a bid to focus on profitability. It has worked on its high inventory levels and even boosted its balance sheet by refinancing its debt. Most importantly, it tweaked its commercial side of the business to improve efficiency.

The challenge for Asos and other British fashion retailers is that competition in the industry is rising while the cost of living crisis is escalating. 

Asos share price forecast

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Asos chart by TradingView

The daily chart shows that the Asos stock price has moved sideways in the past few months. It has remained between the key support at 317p and resistance at 448p. As a result, the shares have remained at the 50-day and 25-day moving averages.

A closer look at the stock’s volume has moved downwards. Therefore, while the company’s fundamentals are relatively weak, there is a likelihood that it is in the accumulation phase of the Wyckoff Method. 

Therefore, while it is hard to predict, we can’t rule out a situation where the stock makes a bullish breakout after its earnings. If this happens, the shares will likely rebound and retest the key resistance level at 450p. 

The alternative scenario is where the shares makes a bearish breakout and retest the lower side of the horizontal channel at 317p. This will happen since the stock has formed what looks like a bearish flag pattern.

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