Deutsche Bank lowers target price on Asos

Berenberg said Asos has agreed to financing that will give it time to simplify its business model with increased fashion focus over the next 12 months, while also improving unit economics and managing its cost base more effectively.

The German bank, which reiterated its 'buy' rating on the stock, said the investor debate had started to move towards one of survival and cash management, which explains the recent relief rally in the group's share price.

"The big picture is that we believe Asos is taking the necessary steps to ensure it remains relevant to its consumers with the higher fashion component necessary for differentiation from larger platforms," said DB.

"The decision to focus guidance on cash flow highlights both the current macro uncertainty and the current debt situation."

However, the analysts opted to lower its FY23 adjusted underlying earnings estimates by 47% given the updated guidance but can still see the potential for progression over the next few years as the plan evolves.

Reporting by Iain Gilbert at Sharecast.com