- Summary:
- We explain why the Boohoo share price could fall by about 23% in the next few months despite assurances by key executives.
The Boohoo share price popped on Thursday after the company raised investors’ confidence by outlining key investment priorities. The BOO stock rose by more than 6% to a high of 282p. This was a strong performance considering that the shares fell to 247p early this week.
Boohoo news
The Boohoo stock price has lagged the overall market in the past few months. Indeed, the shares have declined by more than 25% from its year-to-date high.
There are several reasons why the stock has retreated recently. First, the fashion industry is seeing significant costs as commodities, labour, and shipping prices escalate. While most of the firm’s products are sourced in the UK, their raw materials are from other countries, meaning that costs have remained an issue.
Second, there are concerns that the company’s competition with Shein, the fast-growing Chinese app that has recently topped app store rankings in the UK and US. This is notable since Shein uses Boohoo’s business model of selling a lot of clothes at a cheap price.
Third, the Boohoo share price has struggled as investors remain concerned about online businesses as the UK economy reopens. Indeed, a closer look at the market shows that companies with an exposure to digital sales like Ocado, Royal Mail, and Tesco have struggled.
Now, the company is attempting to reassure its investors about the strength of its business. In a statement, the firm said that it will boost its UK investments to deal with demand. Precisely, the firm aims to add 5,000 jobs and invest 500 million pounds in the next five years. This was a notable announcement since the firm employs 5,000 people globally. The CEO said:
“The investments we have planned will help us to continue our growth, increasing our customer base both at home and abroad, adding even more value as we do so.”
Boohoo share price forecast
The daily chart shows that the BOO share price has been bleeding recently. It has crashed by 25% from its YTD high and by 35% from its highest level in 2020. The stock recently moved below the important support at 311p, where it struggled moving below since March. The stock has also made a death cross, which happens when the 50-day and 200-day moving averages make a crossover.
Therefore, despite the jump, the stock is still bearish, with the next important support being at 215p. This was the lowest level on October 19 and is about 23% below the current level. A move above 311p will invalidate this view.
