Morgan Stanley raises target for Asos by half as consumer shun stores

Analysts at Morgan Stanley hiked their target price for shares of Asos by almost half following the company's latest trading update and on the back of proprietary research showing that UK consumers were set to continue shunning physical stores - but only in the short-term.

There was hardly anything extraordinary about the online fashion retailer's guidance for full-year sales, they said.

But the company's steer on profits was well ahead of what they and the consensus had penciled-in.

So what's the bottom line?

"For most pure-play clothing retailers, the tailwind of online channel shift is more than offsetting the headwind of a very weak underlying apparel market. And it is continuing to do so even after stores have reopened," the analysts explained.

The broker's consumer survey data backed up that claim, showing that many consumers were planning to avoid going shopping "unnecessarily" in coming months.

Indeed, while changing rooms remained shut, there was little point in going, Morgan Stanley said.

Nonetheless, Morgan Stanley remained convinced that the shift to online channels would not prove permanent.

"We would urge investors,however, not to leap to the conclusion that the channel shift we are currently witnessing will prove permanent. Our survey data also suggests that once a vaccine becomes widely available,and social distancing is no longer required, most consumers expect to go back to shopping the way they did before COVID 19 emerged."

Morgan Stanley revised its target price for Asos' shares from 1,650.0p to 2,400.0p.