The Boohoo share price rose by more than 3% on Wednesday after the strong Next PLC earnings and as retail stocks jumped. The BOO stock ended the day at 280p, which was about 5% above the lowest level this month. The shares are still 27% below the highest point this year.
Boohoo news. The Boohoo stock price has been under pressure recently as investors predict that the firm’s sales will start slowing down as the UK economy reopens. The decline accelerated last week when Asos published relatively weak quarterly results. Since the two firms are almost similar, investors were concerned that Boohoo too would be affected.
This changed on Wednesday when Next PLC announced strong results. The firm also upgraded its yearly profit by more than 30 million pounds. It now expects that it will make about 750 million pounds in profits this year. This growth will be driven by the strong performance of its digital sales. Notably, the firm said that it will return 29 million pounds to the government.
Still, Boohoo is facing significant challenges ahead. For example, its founder, Mahmud Kamani is fighting to avoid giving evidence in a US court. At the same time, the company is expected to see higher costs as the economy reopens. Recently, the prices of most commodities and shipping have risen.
On the other hand, the firm has some opportunities ahead. For one, its recent acquisitions of Debenhams is expected to help it boost sales. This is because the digital version of Debenhams was always a growth company even before the company collapsed.
A month ago, I warned that the BOO share price was at risk of a major bearish breakout. I pointed to the fact that the stock had formed what looked like a descending triangle pattern. This prediction was accurate since the shares have fallen by more than 15%.
It remains below the triangle’s support at 307p while the Relative Strength Index (RSI) have moved above the oversold level of 30. Therefore, for now, I suspect that the shares will have a relief rally or a dead cat bounce and then it will resume the bearish trend. On the flip side, a move above300p will invalidate this trend.
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