Berenberg raises target price on Asos following acquisitions

Analysts at Berenberg raised their target price on retailer Asos from 6,500.0p to 6,800.0p on Tuesday following its acquisition of the Topshop, Topman, Miss Selfridge and HIIT brands a day earlier.

Berenberg believes the deal makes "good strategic sense" for Asos, with the acquired brands all having "very strong" awareness among the firm's target customer group, making the acquisition a "match made in heaven" and also meant the company could more than treble the number of SKUs from the acquired brands on its platform.

The German bank noted that Asos trades on just 25x 2022 earnings per share, which with the exception of the early stages of the pandemic was its lowest multiple since 2011, and also pointed out that risk was to the upside of its top-line guidance given the potential for the transfer of sales from the store estate and its strong cash generation, which should provide it with a solid war chest if any further attractive opportunities were to arise in the coming years.

"Looking forward, we forecast Asos to generate over £900.0m of FCFE in the next five years, leaving ample firepower for the company to capitalise on additional attractive M&A opportunities should they arise," concluded Berenberg, which also reiterated its 'top pick' rating on the stock.