Cracking performance from PrettyLittleThing is set to drive upgrades at Boohoo, says Barclays. Look out, too, for updates from SSE and PZ Cussons.
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Wednesday 27 September
Online fashion retailer Boohoo.com (BOO) will report first-half results Wednesday – and it’s already received an upgrade from broker Barclays.
A fortnight ago, previewing the forthcoming update, analyst Andrew Ross, who only initiated coverage in March, moved to an ‘overweight’ rating and hiked his price target by a fifth to 265p. That gave the shares a nice boost, with the stock up 6% the following day. It’s now at 248p.
Ross says, while it’s always been clear that Boohoo “has a competitive advantage in its supply chain and ecommerce-only model that will yield share gains for many years to come”, he’s “not been able to get comfortable enough on forecasts to find the valuation appealing”. In the past year alone it’s up 160%.
An increased confidence in current trading has led Ross to upgrade earnings per share (EPS) by 4% for both full-year 2018 and 2019.
PrettyLittleThing, which sells clothes for 16-25-year-old females, continues to thrive and is expected to “drive upgrades at the results”. Ross forecasts revenues of £155 million in total, above Boohoo’s £95 million guidance.
“Our consistent valuation framework… now yields a risk/reward that we think stacks up.” That’s despite the eye-watering valuation – a forward price/earnings (PE) ratio for 2018 of 55.5 times. “There are still question marks… but upgrades trump these concerns in our assessment of the share price performance nearer term.”
PZ Cussons (PZC) is another firm benefiting from broker upgrades ahead of a trading update this week. Investec hiked its target by 5% to 414p, reiterating its ‘buy’ rating.
The Imperial Leather soap-to-Morning Fresh washing up liquid manufacturer endured a tough 2017, “but coped admirably, delivering a solid pre-tax profit result”, according to analyst Nicola Mallard.
“While we do not believe FY18 will show any significant underlying economic improvement, we do not expect a recurrence of the level of disruption the group had to contend with last year,” she adds.
Revenues in 2018 are expected to dip once again to under £800 million, but pre-tax profit should be up. Revenue will then resume growth in 2910 and beyond. “The brands (and market share) remain in good shape, so PZ Cussons should be well-positioned for growth as the climate improves,” Mallard explains.
It’s a busy day Wednesday, as utilities provider SSE (SSE) also updates the market.
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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.