Deutsche Bank upgrades ASOS to 'buy'
Deutsche Bank upgraded online fashion retailer ASOS to ‘buy’ from ‘hold’ and hiked the price target to 7,400p from 5,800p.
The bank said ASOS is well placed to continue to benefit from the online channel shift, underpinned by a high pace of active customer number additions and expansion into the activewear and beauty categories.
“In particular in 2018 we expect strong growth in Europe, as the company delivers the full service and cost benefits of its localised logistics and digital shopfronts. Meanwhile, customer economics remain very strong with payback on acquisition costs more than twice as fast as at Zalando.”
Deutsche Bank outlined five reasons why it is positive on ASOS. It pointed out that the channel shift online continues and said ASOS should continue to gain channel share. In addition, DB said that Face & Body and Activewear categories increase the total addressable market.
It also said that international expansion, especially in Europe, has strong prospects, and the customer economics remain very strong.
ASOS is due to report its four months to the end of December on 25 January. Deutsche said the company already qualitatively commented at its mid-October full year results meeting that the new financial year had started strongly, including in the UK.
“Since then the UK clothing market has been somewhat less favourable but we still anticipate solid reacceleration in UK revenue growth to +15%,” it said.
At 1502 GMT, the shares were up 1.4% to 6,806p.