No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - Shore Capital has upgraded its stance on Boohoo from 'sell' to 'hold' following a big slump in the fast fashion retailer's share price over recent months.
The broker said that, despite the market backdrop being poor - consumer confidence is still low, inflation is having an impact on spending and concerns remain about the fallout from America's trade war - downside is now limited after a 35% drop in the stock since November.
"While we believe that the group could face challenges from a tough macro backdrop, the focus on the Debenhams model could yet provide a more sustainable solution, for which further details are expected during the full-year results," Shore Capital said.
Boohoo said last month that it is to push ahead with plans to rebrand as Debenhams despite opposition from its largest shareholder Frasers Group - a move which Shore Capital said is "sensible".
"By focusing more on a marketplace model, it provides an opportunity for better profitability (management guides to a 20% EBITDA margin for the Debenhams division over the medium-term vs 6-8% margin for Youth brands and double-digit for Karen Millen)," the broker said.
"However, the profile of this profit development remains uncertain, and there remains a negative mix impact from other brands; therefore, we retain some caution while restructuring occurs."
Boohoo shares were up 4% at 20.6p by 1057 GMT.
The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.