Boohoo Share Price Forecast September 2021 – Time to Buy BOO?

Shares of United Kingdom-based online fashion retailer Boohoo (LSE: BOO) is currently in the green trading around the 264p range t the time of writing. BOO shares have risen by an astounding 40% since March. There is also a 34% upside potential for investors. Boohoo is displaying the characteristics of the perfect growth stock with active customers growing 28%, hitting 18 million, led by international revenue growth of 44% year on year.

Boohoo – Technical Analysis

Boohoo’s financial statement indicates a market cap of £3.137 billion with total assets worth £775.9 million. Revenue for 2020 was at £1.75 billion with a profit margin of 5.20% compared to £1.23 billion in 2019.

Moving averages for Boohoo such as Exponential Moving Average (100)(289.0), Simple Moving Average (100)(293.5), Exponential Moving Average (200)(301.3) and Simple Moving Average (200)(316) are pointing towards selling. On the other hand, oscillators such as Relative Strength Index (14)(47.1), Stochastic %K (14, 3, 3)( 50.8), Commodity Channel Index (20)(−17.7) and Average Directional Index (14)(29) are neutral.

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Recent Developments

Boohoo has been embroiled in a legal suit in the United States worth $100. Authorities have called co-founder and executive chair Mahmud Kamani to testify under oath about the company’s inner workings. Several of the company’s brands including its PrettyLittleThing and NastyGal are accused of offering discounts based on entirely “fake” original prices for the last 5 years. The lawsuit comes at a particularly difficult time for the company, which has just recovered from a similar court case in the United Kingdom.

Boohoo has had a history of under-promising and overdelivering but it chose not to raise targets when it released its trading update for Q1. There have been many indicators that the business has been booming for Boohoo, such as investing £500 million in the UK over the next five years and further investments in warehouse space and technology. They are also expected to hire more than 5000 people in the coming years.

Management expects 2021  to be a breakthrough year for the company as it expects revenue growth to be between 36% to 38%. The company’s recently acquired entities will fuel this growth, including the acquisition of Debenhams for £55 million. There will be plenty of growth opportunities for the group to explore in the future due to such a diversified portfolio.

However, the company is still not without its risks. A supplier for the company’s Leicester factory got investigated in 2020 for allegations of slave labour. The management reacted swiftly, investigating the incident and sacking hundreds of suppliers. There is also a risk that consumers will leave Boohoo to return to brick-and-mortar shops like Primark once society returns to normal. This could negatively affect Boohoo’s top line.

Should You Buy BOO Shares?

Investors will have to look at various factors and challenges such as material costs, labour costs, and economic uncertainty which can drag down the company’s value. The valuation of the company could become less attractive to investors. But the shares look incredibly desirable at this point.

Boohoo is currently a solid growth company that is trading at a historically low valuation.  As it’s well-diversified, the company will reap the benefits of multiple growth opportunities for years to come. But investors should always keep one eye on the various problems that the company has. Particularly, they should look out for any new information on the Leicester scandal, which can negatively affect the share price performance. The shares are expected to be much more expensive in the next five years.

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