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Over the past year, the boohoo (LSE:BOO) share price has fallen by 26%. The bulk of this move has come in the past three months, with a strategy overhaul under way to try and turn the company around. With the recent changes, including rebranding the group to Debenhams, analysts at top institutions have been revising their share price targets for the firm. Here’s what it means for investors.
The view from the City
At the moment, the boohoo share price is at 26.5p. Of the 11 analysts with a current projection, six have a Sell rating, four suggest it’s a Hold and only one has a Buy rating. In terms of specific numbers, the average target price based is 26.56p. The team at Barclays has the lowest view at 21p, with Singer Capital Markets the highest at 36p.
As a disclaimer, these forecasts are subjective and simply the view of the research analysts who put them out. It doesn’t mean that the stock will hit that particular price.
The average price forecast is basically the same as the current price. This is interesting as it suggests the worst of the drop is now over. However, the fact that there’s a range of views highlights that there could be volatility throughout the next year.
Why the forecast could be correct
One reason why the stock might steady and stop falling is due to the raft of changes being brought in. For example, earlier this month boohoo announced its rebranding to Debenhams Group. This move reflects a strategic shift to leverage the established Debenhams brand, (which boohoo bought in 2021) and to adopt a marketplace model similar to Debenhams’ increasingly successful operations.
This could be a smart play because the rebranding means a broader variety of brands’ products will be sold, alongside boohoo’s existing offerings. Plus it move sit away from competing quite so directly with Shein.
Alongside the strategic overhaul, boohoo appointed Phil Ellis this month as the new Group Finance Director, replacing Stephen Morana. Ellis had been involved in the turnaround of the Debenhams business, indicating a leadership focus on replicating that success with boohoo.
Finally, the company is implementing cost-cutting initiatives, including the closure of a warehouse in the US and a reduction of hundreds of jobs at the Manchester office. If investors can be content that lower costs and stable revenue projections can last this year, then it should help to get the business back to making a profit.
Limited interest right now
A risk to the view is that financial performance this year is worse than currently expected. Even though the forecast is for a loss, if updates reveal that it’s likely to be larger than previously thought, the stock could fall as investors recalibrate their view of the company.
Based on the view from the experts, I’m not in any rush to buy the stock. However, if it continued to fall, I’d consider it as an undervalued purchase.
