The Boohoo share price has been under intense pressure as investors remained concerned about the company’s growth. The BOO stock has dropped to 258p, which is about 10% below the highest level this month.
There are several reasons why the Boohoo share price is under pressure. First, the company’s business has been in the spotlight after the recent accusation about labour issues in Leicester. While the company has made some steps to solve the issues, it seems like investors have not forgotten.
Second, investors are concerned about whether Boohoo will maintain its growth now that many UK stores are open for business. Analysts believe that more people will go back to shop in physical stores. Still, there is a high probability that they are wrong since e-commerce is expected to keep growing especially among millennials.
Third, there are concerns about the company’s competition from the likes of Shein and other fast-growing online brands. The general view is that more young people will opt for these brands, which will cut Boohoo’s market share.
Meanwhile, there are concerns about cost now that the shipping logjam is expected to remain for longer than expected. Indeed, the prices of most items, including natural gas is rising. The pricing challenge is expected to eat into Boohoo’s margins because it will not have substantial pricing power.
Early this month, I warned that the Boohoo stock price would decline to about 250p. At the time, the shares were trading at 282p. To a large extent, this view was correct since the stock is now trading at 258p, which is just 8 pence above the target price.
The stock remains below the 25-day and 50-day moving averages on the daily chart. It has also moved below the lower side of the descending channel and formed a break and retest pattern. The stock’s oscillators have also been on a downward trend.
Therefore, the stock will likely keep falling as bears attempt to do a double-bottom pattern at 247p. On the flip side, a jump above 250p will invalidate the bearish view.