The Boohoo share price is struggling even after the company made a significant announcement on Debehmans. The BOO stock declined to 292p, which was about 22% below the highest point this year and 32% lower than last year’s high of 433p.
Boohoo news. Boohoo, the fast-growing fast-fashion brand has been under pressure this year. The stock has struggled because of the potential high costs as the company improves its supply chain. Further, as we noted last week, the company is facing rising competition with Shein, the Chinese company. In addition, there are concerns that the company’s growth will start slowing down as more retailers open.
Still, the company has some good things happening. For one, online sales are expected to remain strong as the UK unemployment falls. Further, the company will likely take advantage of its recently acquired Debenhams brand to grow. This week, the company announced that it will expand its business in the Middle East by partnering with Alshaya Brands. The company will have rights to operate its shops and websites in countries like Saudi Arabia and Kuwait.
Meanwhile, the City analysts are generally bullish on the Boohoo share price. The most recent analysts calls came in June when Liberum, Shore Capital, and Numids Securities upgraded and reiterated their bullish view on the company.
At the same time, a DCF valuation of the company shows that it is 23% undervalued based on its future cash flows.
Our recent article on the BOO share price noted that it had formed a descending triangle pattern and predicted that it will have a bearish breakout. This prediction was accurate as the stock made a bearish breakout this week. It has also moved below the 25-day and 50-day moving averages.
Therefore, I suspect that the stock will have a relief rally that will see it retest the resistance at 307p. It will then resume the downward trend. This is known as a break and retest approach. The forecast will be invalidated if it moves above the psychological level of 320p.
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