Boohoo Share Price Forecast December 2021 – Time to Buy BOO?
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Shares of online fashion retailer Boohoo (LSE: BOO) are in the red today, after closing on 106.05p as of December 16th (17:53 GMT). The shares have had a disappointing 2021 with the situation only getting worse when it released its latest trading update yesterday. At present, the shares are down 66% year to date with signs that things are going to get worse for the company.
Boohoo – Technical Analysis
According to Boohoo’s financial statement, the market cap of the company is at £167.763 billion with total assets worth £ 94.27 billion. Revenue for 2020 was at £174.53 billion with a profit margin of 5.20%, compared to £123.49 billion in 2019.
Oscillators such as Relative Strength Index (14)(15.36), Stochastic %K (14, 3, 3)(5.21), Commodity Channel Index (20)(−287.51), Average Directional Index (14)(46.18) and Awesome Oscillator(−34.02) are neutral. Moving averages such as Exponential Moving Average (10)(145.27), Simple Moving Average (10)(149.92), Exponential Moving Average (20)(158.37), Simple Moving Average (20)(162.06) and Exponential Moving Average (30)(167.33) are indicating a sell action.
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Recent Developments
Boohoo’s share price has struggled this year and is currently at a level not seen since 2018 despite the fact that Boohoo generated revenues of £580 million in 2018, compared to £1.75 billion last year. However, there are a couple of reasons for this large share price fall. The company was under the scanner last year due to the “modern slavery “ investigation where it was revealed that some workers in its supply chain were paid as little as £3.50 an hour. While the company has promised to implement changes, it will likely be at the expense of its already slim profit margins.
Boohoo is also facing increasing competition from Chinese group Shein which has forecasted sales of £14.6 billion. Boohoo has also recently reported an additional £26m charge relating to rising shipping costs which has lowered profits.
Should You Buy BOO Shares?
Boohoo has been experiencing a lot of short-selling in recent days, which can be an investor’s nightmare. But the company has been through such selling pressure before. Boohoo was accused by hedge fund ShadowFall, which claimed the company was overstating its profits and cash flow back in May 2020. However, those allegations were refuted and investors were gaining back confidence.
The company’s overall net sales only increased by roughly 10% while demand did not decrease in the three months leading up to November 30th. This was primarily due to a much higher amount of clothes being returned. The company’s performance has also suffered from higher costs from longer delivery times. It had previously expected a full-year net sales growth of 20% to 25% but has now decreased it to 12% to 14%.
Investor confidence dropped when Boohoo reported short-term challenges regarding the firm’s supply chain. The share price is further getting affected due to the rise of the Omicron variant of Covid-19. However. The directors of the company felt extremely confident for September’s half-year results.
Boohoo’s performance was impacted by significantly longer customer delivery times due to the pandemic as its international sales are fulfilled from their UK distribution network. The company’s previously anticipated recovery in the USA hasn’t happened due to the continued impact of reduced air freight capacity on delivery times. The company has also forecasted ‘freight cost inflation’ will impact EBITDA by around £20 million in the financial year. The company plans to expedite the creation of its first US distribution centre to combat this problem. Based on all of the above, investors would be better off adding these shares only to their watchlist for now.
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