Jump to content

Is ASOS’ Driving Change agenda bearing fruit?


Recommended Posts

Fundamental analysis of the ASOS share price as its share price remains under pressure.

ASOSSource: Bloomberg
 

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 17 July 2023 

Is ASOS’ Driving Change agenda bearing fruit?

Asos, faces obstacles in achieving its mid-term revenue target of £7 billion and a 4% Earnings Before Interest and Taxes (EBIT) margin by 2033. The growth in online sales has been slower than anticipated, and the outcomes of its Driving Change strategy remain uncertain. It called for a renewed commercial model, stronger order economics and a lighter cost profile as well as a robust and flexible balance sheet.

Nevertheless, there are encouraging signs of improved profitability and cash flow as the company concentrates on selling items at full price and effectively managing its inventory. However, a major hurdle lies in the company's ability to stimulate sales growth, which necessitates a shift in customer behaviour away from seeking discounts.

Asos intends to expand its partnerships, with the aim of these collaborations accounting for 5% of Gross Merchandise Volume (GMV) within the next 2-3 years and 25% in the long term. However, it is improbable that this distribution channel will significantly increase the EBIT margin to the targeted 8% due to the associated higher costs. 

At 36 times earnings, the shares actually trade right around their five-year average, after peaking at 68 times earnings. But with so much uncertainty around its plans and the growth of competitors like Vinted, investors may deem this too high a multiple given the risks around the outlook. 

ASOS analyst outlook

ASOS analystsSource: Refinitiv

Refinitiv data shows a consensus analyst rating of ‘hold’ for ASOS – 4 strong buy, 2 buy, 18 hold and 4 sell - with the median of estimates suggesting a long-term price target of 500 pence for the share, roughly 46% higher than the current price (as of 17 July 2023).

ASOS IGSource: IG

IG sentiment data shows that 99% of clients with open positions on the share (as of 17 June 2023) expect the price to rise over the near term, while 3% of clients expect the price to fall whereas trading activity over this week shows 75% and this month 56% of buys.

ASOS – technical view

The swift decline in the ASOS share price following its March-to-early May range trading phase has taken it to levels last traded in October of 2009.

The company’s share price, which trades at -36% year-to-date, dropped by over 40% since May on disappointing half-year results and remains in a clearly defined downtrend.

ASOS Monthly Candlestick Chart

ASOS Monthly chartSource: Tradingview

Even though ASOS’s share price managed to so far stabilise above its June and current July lows at 323.00p to 322.90p, downside pressure may soon push it through those lows towards the July 2009 low at 306.8p and the psychological 300p mark.

For any kind of potentially bullish reversal to gain traction, the mid-May and June highs as well as the 55-day simple moving average (SMA) at 424.90p to 475.8p would need to be exceeded on a daily chart closing basis.

ASOS Daily Candlestick Chart

ASOS daily chartSource: Tradingview

Only then would the March-to-July downtrend line and December 2022 trough at 486.4p be back in sight.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • PG Elliott Wave Analysis Trading Lounge Daily Chart, 1 March 24 The Procter & Gamble Company, (PG) Daily Chart PG Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulse STRUCTURE: Motive POSITION: Minuette wave (ii) of {iii}. DIRECTION: Bottom in wave (ii).   DETAILS: As we are approaching ATH at 165$, we are expecting either an acceleration higher into wave (3) or else we could have topped in wave (C) to then fall back lower and continue the major correction.         PG Elliott Wave Analysis Trading Lounge 4Hr Chart, 1 March 24 The Procter & Gamble Company, (PG) 4Hr Chart PG Elliott Wave Technical Analysis FUNCTION: Counter Trend MODE: Corrective STRUCTURE: Zigzag   POSITION: Wave a of (ii).   DIRECTION: Downside into wave (ii). DETAILS: Looking for a clear three wave move into wave (ii) to finding support around the 155$ mark.   Welcome to our PG Elliott Wave Analysis Trading Lounge, your ultimate destination for detailed insights into The Procter & Gamble Company (PG) using Elliott Wave Technical Analysis. As of the Daily Chart on 1 March 24, we dive into crucial trends shaping the market.         *PG Elliott Wave Technical Analysis – Daily Chart* In terms of wave dynamics, we identify a trend function with an impulse structure, specifically a motive pattern. The current position is in Minuette wave (ii) of {iii}, indicating a potential bottom in wave (ii). With the approaching all-time high (ATH) at $165, we anticipate either an upward acceleration into wave (3) or a potential top in wave (C), followed by a downward movement to continue the major correction. *PG Elliott Wave Technical Analysis – 4Hr Chart* Here, we explore a counter trend mode with a corrective structure, specifically a zigzag pattern. The present position is in Wave a of (ii), suggesting downside movement into wave (ii). We anticipate a clear three-wave move into wave (ii), aiming to find support around the $155 mark.  
    • The new month kicked off with several stock market indices hitting record highs on Thursday. Japan's Nikkei Average, the S&P 500, and the Nasdaq all closed at fresh record peaks. The gains were buoyed by tech stocks like NVIDIA and Advanced Micro Devices. Stock markets are in an upbeat mood after US inflation figures came in line with expectations on Thursday. This helped shape forecasts for the timing of future Fed interest rate cuts. It extended the ongoing global equity rally and also pushed Treasury yields lower. The DAX also reached a new all-time high on Thursday. Europe opens today waiting for inflation data that should indicate inflation is moving back toward the 2% target. This comes after data showed inflation dropping in countries like Germany, France and Spain thanks to lower energy and food prices. The ECB has maintained record-high interest rates since September. Also on the calendar today is the US ISM manufacturing PMI.   
    • Cocoa Elliott Wave Analysis - 1 March 24 Function - Trend Mode - Impulsive Structure - Impulse Wave Position - Blue wave ‘iv’ unfolds Direction - Blue wave ‘iv’ in progress Cocoa has been a standout performer in the commodity market over the past two years, exhibiting a robust upward trend since September 2022. During this period, Cocoa prices have surged by an impressive 170%, following a discernible impulse wave pattern. Examining the daily chart, it is evident that the current rally, which commenced around the 2200 mark, is approaching its final stages. The completion of black wave 5 marked the conclusion of blue sub-wave iii at 6500. The recent downward movement indicates the emergence of blue sub-wave iv. Based on projections, blue sub-wave iv of 5 is anticipated to progress towards the significant level of 8000. A closer inspection of the sub-waves within blue wave iv reveals a potential three-wave decline, as depicted on the H4 chart. This decline from 6500 is forecasted to retrace towards the Fibonacci levels of 5489-5174. Additionally, the critical trading level of 5000 serves as another pivotal area to monitor for potential support should the ongoing dip breach the aforementioned Fibonacci zone. However, it's essential to note that the development of the wave 5 impulse pattern would be invalidated if prices were to fall below 4354. In summary, adopting a strategy of buying into the dip appears to be the most prudent approach for traders interested in Cocoa. The focus will be on purchasing opportunities towards the end of blue wave iv of 5, particularly if there's a bullish reaction observed at the identified price support levels. This analysis underscores the potential opportunities within Cocoa's current price movement and provides a framework for traders to navigate the market effectively. By incorporating Elliott Wave principles, traders can better understand the underlying market dynamics and make informed decisions to capitalize on future price movements in Cocoa. Technical Analyst : Sanmi Adeagbo          
×
×
  • Create New...
us