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

    • Copper Elliott Wave Analysis Function - Counter-Trend Mode - Corrective Structure - Zigzag Position -Wave 4 Direction - Wave 5 Details - It appears wave 4 has been completed but we need a confirmation above 4.686 with an impulse break. Otherwise, the price could make a minor corrective bounce below the confirmation level and falter further. Copper prices are reversing upward, recovering from the sell-off that began on May 20, 2024. The broader picture indicates that this sell-off is a correction within the larger bullish cycle that started in October 2023. The current recovery, which began on June 18, 2024, has the potential to rise further and possibly break the high from May 20, 2024.   Daily Chart Analysis: On the daily chart, a bullish impulse wave has been developing since July 2022, when copper hit a low of $3.13. This impulse wave is currently in wave (3). Specifically, wave 3 of (3) concluded at $5.192, and wave 4 of (3) likely ended at the low on June 18. We can anticipate copper prices to recover into wave 5, completing wave (3) above $5.192 before the next pullback for wave (4) occurs. The invalidation level for this wave count is at $3.975.   H4 Chart Analysis: On the H4 chart, wave 4 appears as a double zigzag pattern. Wave a (circled) of 4 ended with an impulse structure, while wave c (circled) concluded with an ending diagonal pattern. A bullish confirmation would occur if the price breaches $4.686 with an impulse wave, indicating a strong likelihood of further recovery.   Alternative Scenario: Alternatively, the decline on the H4 chart could be interpreted as an impulse wave. If this is the case, the current bullish recovery remains valid. However, we would not see a breach of the $5.192 high before the price resumes its downward movement to break below $4.379. Therefore, in both scenarios, copper prices are expected to maintain their current recovery to at least the $4.69-$4.788 range in the near term.   Summary: Copper has been recovering from the sell-off that started on May 20, 2024, within the context of a larger bullish cycle that began in October 2023. On the daily chart, a bullish impulse wave has been forming since July 2022, with wave 3 of (3) completing at $5.192 and wave 4 of (3) likely concluding at the June 18 low. The price is expected to rise into wave 5, surpassing $5.192 before the next pullback for wave (4). The invalidation level for this wave count is at $3.975.   On the H4 chart, wave 4 is identified as a double zigzag, with wave a (circled) ending in an impulse and wave c (circled) in an ending diagonal. Bullish confirmation would be a break above $4.686 with an impulse wave, signaling further recovery.    Alternatively, if the decline is an impulse wave, the bullish recovery is still valid but without breaching $5.192 before dropping below $4.379. In either scenario, copper prices are likely to continue recovering to the $4.69-$4.788 range in the near term. Technical Analyst : Sanmi Adeagbo Source : Tradinglounge.com get trial here!  
    • ADI Elliott Wave Analysis Trading Lounge Daily Chart, Analog Devices Inc., (ADI) Daily Chart ADI Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive POSITION: Minor wave 3 DIRECTION: Top in 3.   DETAILS: Looking for continuation higher towards medium level at 250$. We have a nice alternation between a sideways wave {iv} and a sharp wave {ii}.   ADI Elliott Wave Analysis Trading Lounge 4Hr Chart, Analog Devices Inc., (ADI) 4Hr Chart ADI Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive   POSITION: Wave {v}. DIRECTION: Upside in wave {v}. DETAILS: We seem to have completed the correction in wave {iv} with a clear three wave structure. Looking for continuation higher into equality of {v} vs. {i} at 254$.   Welcome to our latest Elliott Wave analysis for Analog Devices Inc. (ADI) as of June 19, 2024. This analysis provides an in-depth look at ADI's price movements using the Elliott Wave Theory, helping traders identify potential opportunities based on current trends and market structure. We will cover insights from both the daily and 4-hour charts to offer a comprehensive perspective on ADI's market behavior.   * ADI Elliott Wave Technical Analysis – Daily Chart* In our Elliott Wave analysis of Analog Devices Inc. (ADI), we observe an impulsive trend pattern characterized by a motive structure. ADI is currently positioned in Minor wave 3, indicating a continuation higher towards the medium level at $250. The wave structure shows a clear alternation between a sideways wave {iv} and a sharp wave {ii}, which is a typical feature in Elliott Wave theory, suggesting healthy trend progression. Traders should monitor for the top in Minor wave 3 and the potential transition into wave {v}, which could offer opportunities for profit-taking or strategic adjustments to long positions.   * ADI Elliott Wave Technical Analysis – 4Hr Chart* On the 4-hour chart, ADI continues to follow an impulsive trend mode within a motive structure, specifically in wave {v}. The recent correction in wave {iv} appears to have completed with a clear three-wave structure, indicating a possible resumption of the uptrend. The target for wave {v} is set at the equality of {v} vs. {i} at $254. Traders should look for confirmation of this upward movement as the wave {v} progresses towards the target level, which may present opportunities for entering long positions or adding to existing ones.   Technical Analyst : Alessio Barretta Source : Tradinglounge.com get trial here!  
    • Asian shares rose to a one-month high on Wednesday, led by a rally in tech stocks like Nvidia which surpassed Microsoft to become the world's most valuable company. The dollar was steady as soft US retail sales data reinforced expectations of the Federal Reserve cutting interest rates later this year. Markets are pricing in around 48 basis points of rate cuts by the Fed in 2024. Trading is expected to be muted due to the US markets being closed for the Juneteenth holiday on Wednesday. Oil prices were steady, with Brent crude around $85 per barrel and WTI crude near $81.5 per barrel. UK inflation slowed to 2% year-on-year in May, from 2.3%, and held at 0.3% month-on-month. Core CPI slowed to 3.5% YoY from 3.9%. 
×
×
  • Create New...
us