Goldman Sachs downgrades ASOS to 'neutral' on valuation
Goldman Sachs downgraded ASOS to 'neutral' from 'buy' following a strong share price performance.
Since being added to Goldman's 'buy' list in November 2016, the shares are up 13.9% versus the FTSE World Europe up 12.4% and the bank's Retail & Luxury Goods coverage up around 8%.
GS said the company's performance has been driven by solid execution driving raised expectations for FY17 growth, which was confirmed by management’s guidance at the first quarter results.
"We continue to believe that ASOS’s social engagement-driven strategy is appropriate for its target ‘20/20’ customer and that investors underestimate its ability to drive strong acquisition and retention of customers over time."
Goldman said that as regions such as the UK mature, the company has optionality on reinvesting for growth in less mature markets or allowing profitability to rise.
The bank's estimates are around 2% ahead of Reuters consensus on revenues for FY17/18 and approximately 1%-2% ahead on pre-tax profit.
GS kept its 12-month price target of 5,800p on the stock.
At 0926 GMT, the shares were down 0.7% to 5,882p.