Liberum raises target price on Boohoo

Analysts at Liberum raised their target price on online fashion retailer Boohoo from 430.0p to 490.0p on Friday, arguing that its recently announced acquisition of the remaining 34% stake in Prettylittlething that it didn't already hold was a "very shrewd and positive move".

Liberum estimates that the deal values 100% of Prettylittlething at £998-1,225m, suggesting a 12m forward 12-15x enterprise value/earnings before interest, tax, depreciation and amortisation ratio - around half of the respective current multiples for Boohoo.

However, the analysts highlighted that the group has likely acquired this stake at a 30% minority discount, suggesting £300-367m value which has not been paid for and, therefore, accrues to group shareholders.

They also noted that Boohoo still retains roughly £350m of net cash to pursue further mergers and acquisitions.

"We forecast £215m of FCF over the next two years, leading to net cash of £476m by year-end FY22E, excluding further M&A," said Liberum, which added that the deal drove its earnings per share upgrades of 13-14%.

"This gives significant firepower to continue developing the group's stable of own brands, broadening its customer base and opportunity set across the global fashion market."