Credit Suisse ups target price for Boohoo but says shares 'fairly valued'

Analysts at Credit Suisse reiterated their 'hold' recommendation on shares Boohoo, explaining to them that while business was booming, growth was set to slow and their valuation was already at historic highs and well above peers' and their own historical level.

Key to the investment thesis for the online fashion retailer, it was benefiting from a "structural shift" in the space, which in turn was being accelerated by the pandemic.

To its strong presence in social media and "superior" digital platform, the Swiss broker added the de facto elimination of physical rivals and the uptake of shopping for affordable wear as a form of entertainment.

Hence their forecast for 30% topline growth in financial year 2021, helped by market share growth in the US and Europe, but after a 45% year-on-year jump in sales in the first three months of the same, the rate of increase was set to slow.

The recent purchase of rival brands Oasis Warehouse would also help the firm expand its offering and attain higher price points, Crdeit Suisse said.

"This helps diversify the target consumer away from the value segment into middle market and is stretching the group’s price architecture," they said.

"The Oasis and Warehouse customers are more mature and more affluent than those of the core boohoo/PLT/NG brands. The brands are likely to launch in the Autumn."

Nevertheless, trading on a record three times' their forward EV/Sales, versus a historic median of 2.2 and competitors Asos and Zalando on 0.8 and 1.7, respectively, valuation multiples were already at record highs.

"The shares are up 30%+ YTD and with a moderation of growth rate likely in the remainder of the year we argue the current share price is broadly fair value," they added.

Nonetheless, they marked up their target price for the stock higher from 400.0p to 440.0p on the back of a 22% upwards revision to their financial year 2021 EBITDA.