Boohoo Shares Cut to Underperform Based on Downside to Revenue and Earnings Estimates

Boohoo saw its shares downgraded on Thursday by RBC Capital following a cautious outlook on recovery across the European internet sector.

RBC Capital analyst Sherri Malek downgraded Boohoo to Underperform from Sector Perform and kept its price target unchanged at 35p.

The analyst is cautious on the recovery for the European internet sector and sees multiple downsides to revenue and earnings estimates for retail stocks. Therefore, RBC views Boohoo’s valuation as demanding, seeing limited scopes to raise prices.

Not ideal for the stock which tumbled almost 60% in the last year.

Boohoo recently reported its trading statement for the four months to 31 December. This saw revenue decline 10.7% as consumers returned to instore shopping in comparison to elevated online spending due to omicron in the prior year.

Factors such as increased cost-of-living, reduced impact from Covid variants, and postal strikes affecting delivery times have all played a part in the declines seen at Boohoo during a crucial Christmas period.

In addition, Boohoo’s price target was lowered to 35p from 40p at Morgan Stanley in early January.

The firm was able to keep EBITDA and revenue guidance unchanged, however recent downgrades highlight the issues the online fashion brand faces going forward.

A slight positive insight for Boohoo sees organic traffic to the firm’s website currently above levels shown in January 2021. The group has been able to keep traffic to its website at levels above pre-pandemic. But it will be vital for its traffic to translate into sales going forward.

Despite RBC Capital’s downgrade, our recent analysis suggests Boohoo’s consumer sentiment has leaned positive over the last month.

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