ASOS share price firmly under pressure ahead of trading statement

[MongiIG]

ASOS shares are on the back foot again, as the gloomy outlook for consumer spending continues to pressure the share price.

Source: Bloomberg

 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 12 July 2022 

ASOS hits 12-year lows

It has been a miserable 18-months for ASOS shareholders.

The big rally from the depths of the pandemic finally petered out early in 2021, as questions over the outlook for such stocks began to take hold.

In addition, inflows shifted away from the pandemic’s winners like ASOS towards those believed to be more likely to benefit from the renewed economic expansion and rising commodity prices.

Markets focus on expectations of future earnings, and for ASOS the picture has become increasingly gloomy. The above-mentioned rise in commodity prices has meant a surge in inflation readings globally, and a consequent response by central banks, which have tightened policy in order to try and slow the rise in prices.

This has resulted in a squeeze on consumer incomes, pressuring stocks like ASOS. Customers have been returning more items in this straitened climate, something that has also affected rival, BooHoo. Having benefited from the strong level of online spending in its core market of 20-year olds, the firm is now feeling the pressure as this demographic is particularly hard-hit by rising prices.

Brokers have been cutting estimates for full-year performance, causing the shares to decline further. For the time being, it looks like this gloomy outlook will persist.

ASOS share price – technical analysis

The share price has dropped by around 80% since last May, moving from around £50 to sub-£10 now, in a fairly relentless move that has seen few sustained rebounds.

The June rebound faltered as it returned to £10, and we have seen the share price fall again over the past two sessions. Additional declines seem set to target the lows from June at £7.72, with the next big level below this down at £5.19.

Source: ProRealTime