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Where to next for Asos share price ahead of FY earnings?


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Fundamental and technical outlook on Asos share price ahead of FY22 earnings out Wednesday as its biggest lenders hired advisers in a move that could pave the way for a formal financial restructuring.

AsosSource: Bloomberg
 
 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 18 October 2022 

Where to next for the Asos share price ahead of FY earnings?

ASOS’ share price trades at its lowest level in 12 years, when the company was roughly 5% of the size it is today, and, according to some analysts, at 51% of book value.

Since the online retailer is being priced well below a distressed acquisition price, the stock is comparatively cheaper than both of its main competitors Boohoo and Zalando which may make it a takeover target.

After all the Asos share price has declined by around 80% year-to-date and by around 92% from its March 2021 peak at 599,5 pence to this week’s low at 460p amid UK broadcaster Sky News’ story that lenders to the online fashion retailer are lining up AlixPartners and Clifford Chance to advise them as the online retailer’s financial performance deteriorates.

The online fashion retailer is thus facing deepening troubles after its biggest lenders, such as Barclays, HSBC and Lloyds Banking Group, hired advisers in a move that could pave the way for a formal financial restructuring.

This comes despite Asos overhauling its board in June of this year by appointing a new chief executive, Jose Antonio Ramos Calamonte, and chairman, Jorge Lindemann, to the board, both of whom were already working in senior roles at the company.

Asos' new CEO Calamonte, previously the online fashion retailer’s chief commercial officer, declined to comment on its lenders’ decision to bring in financial advisers and is expected to set out details of his plan to revive the company's fortunes alongside its results.

Analyst expectations ahead of FY 22 results

The London-listed company will present its full year results on Wednesday.

According to Reuters Refinitiv full-year revenue up to 31 August 2022 is expected to come in at £4,013bn, up 2.63% compared to a year ago, and pre-tax profit at £14m, down -92.77%.

It must be said that the online retailer has grown revenue every single year since it was founded in 2000.

ASOS revenueSource: ASOS Financials

 

Inflationary pressures and the cost-of-living crisis among Asos’ 20-somethings main client base – 83% of the company’s customers are under 40, with the average age of an Asos (“as seen on screen”) customer staying constant at around 28 to 29 years over the past ten years - have led to a string of profit warnings of late.

Last month, Asos said profits for the year ending August 31 would be "around the bottom end" of a previously indicated £20m-£60m range.

According to a Reuters Eikon 30 analyst poll, 3 rate Asos as a “strong buy”, 5 as a “buy”, 16 as a “hold” and 6 as a “sell” with a mean of 2.8 and a median long-term price target of 900p, some 180% above its current share price around the 500p mark (as of 17/10/2022).

AsosSource: Refinitiv Eikon

Technical analysis on the Asos share price

The Asos share price has so far dropped to levels last traded in March 2010, to 460p, gapping lower on the latest news that lenders to the online fashion retailer are lining up AlixPartners and Clifford Chance to advise them as its financial performance deteriorates further, despite having overhauled its board in June of 2022.

Asos Monthly chartSource: ProRealTime

 

Since the trend continues to point lower – with a series of lower highs and lower lows – further downside in the Asos share price is expected to be seen with the September 2008 and May 2009 highs as well as the February 2010 low at 425p to 403.5p representing the next downside target and a possible support zone from where a bounce may be witnessed.

Further down lies the minor psychological 400p mark.

Asos Daily chartSource: ProRealTime

 

For a short-term bullish reversal to be seen, the last reaction high, that is to say a candle which has a higher high than the candle prior to and after it, at last Thursday’s high at 560p would need to be overcome.

For a medium-term technical bullish reversal to unfold, the mid-September high at 743.5p would need to be exceeded, some 56% over current levels (as of 17/10/2022).

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