ShoreCap reinstates coverage of Boohoo at ‘buy’, cites ‘good entry point’

Shore Capital reinstated coverage of fast-fashion retailer Boohoo with a ‘buy’ rating on Wednesday, having previously had a long-standing ‘sell’ on the shares, citing "a good entry point" at historical lows.

The broker said it’s’ been quite a ride for Boohoo shareholders over the past 18 months, with the shares now trading on a CY22F price-to-earnings multiple of 22x and an EV/EBITDA multiple of 13x, which is a 55% discount to last year’s high.

"We think this is an attractive entry point to one of the fastest-growing retailers in the UK. Boohoo is a consummate own-label brand operator with a strong balance sheet and, in seeking to be a platform, it is a stronger player than peers thanks to its proprietary nature," it said.

Shore said that while volatility will undoubtedly persist until supply chain issues normalise, increased marketing spend, faster delivery times and extension into mid-market brands will be key growth drivers for the retailer.

"ESG is now an opportunity for the fast-fashion retailer, as is the underappreciated transformative Debenhams acquisition, having turned Boohoo into a leading player in the UK’s online prestige beauty market," it said.

"With the shares now down to 2017 average levels, we see this as a perfect entry opportunity into the stock."

Shore set a fair value of 345p.