Liberum upgrades Boohoo to ‘buy’

Liberum upgraded shares of fast fashion retailer Boohoo to ‘buy’ from ‘hold’ on Friday as it argued that the valuation deserves to recover.

The broker said its previous ‘hold’ rating was based on the uncertain long-term financial and reputational impact of the supply chain review.

Liberum said it’s clear from the three reports published so far by Sir Brian Leveson that Boohoo has taken the supply chain review very seriously and is going above and beyond to cover all aspects in the review.

"The company is not engaging in a one-time fix of the existing issues highlighted in the review by Alison Levitt QC, but is installing systems and processes that would ensure a continuous process of review and improvement," it said.

"We are satisfied with the progress the company has made so far to fix its supply chain issues, as well as the plans shared for the future," it said.

As a result, the broker reckons the current share price undervalues Boohoo as it should trade at a premium to the peer group given its strong profitable growth forecasts and "huge" market opportunity.

"While we do not reflect this yet with our target price suggesting a discount, as the path to redemption is a long-road, but we fully think the company should start to see the benefits of the work it has done, the promises it has made for the future and the growth being achieved nearly doubling revenues over a two-year basis."

Liberum has a 380p price target on the stock.