The Boohoo share price is under intense pressure as the company faces significant challenges. The BOO stock has crashed to 194p, which was the lowest level since April 2020. It has fallen by more than 50% from its YTD high.
There are several reasons why the Boohoo share price is crashing. First, last month, the company decided to lower its forward guidance as the industry faces challenges. The weak guidance means that the company’s pandemic boom could be coming to an end.
Second, like all fashion companies, the firm is facing logistics challenges because of the breakdown in global shipping. There is also a shortage in workers.
And now, the company has another challenge to deal with. The price of cotton has jumped to the highest level in a decade. US futures trading at the Intercontinental Exchange rose to $1.09 a pound, the highest it has been in more than 10 years.
Therefore, the company will likely see more cost of doing business in the near term. Unlike other luxury brands, the company could find it difficult to hike prices because customers are usually a bit sensitive about pricing.
The daily chart shows that the BOO share price has been in a major sell-off recently. The stock managed to cross the important support level at 214p, which was the lowest level on October 20th. The stock has crashed below the short and longer term moving averages while the MACD has moved below the neutral line. The price is also along the lower line of the Bollinger Bands.
Therefore, I suspect that the stock will keep falling in the near term as bears target the key support at 180p. On the flip side, a move above the resistance at 214p will invalidate the bearish view. In the long-term, however, the stock will likely rebound since Boohoo is a relatively high quality company.