Peel Hunt upgrades ASOS, expects strong sales momentum

Peel Hunt upgraded ASOS to ‘buy’ from ‘hold’ and raised the price target to 4,000p from 3,750p.

“ASOS is clearly back on the front foot. Not only do we expect strong momentum in sales, but the prior-year focus on full price sales has continued into Q1, with lower discount activity year-on-year,” the brokerage said.

It said that as a number of retailers appear to be experiencing, the pre-Christmas shift back to High Street from online appears not to be happening as strongly as it has in the past. Online trends remain strong, to the benefit of ASOS and the pure plays.

The brokerage said that this year, while there continue to be a number of tactical discount events, ASOS is showing little sign of switching out of full price, suggesting there will be strong sales momentum and at least a flat margin performance, if not modest growth.

“Our enthusiasm for ASOS has only ever been tempered on valuation, rather than operational grounds. With sales momentum restored and revenue expectations likely to be beaten, we move the stock back onto our ‘buy’ list,” said Peel.

At 1536 GMT, ASOS shares were up 1.4% to 3,297p.