FTSE 100
Boohoo share price is up by more than 15% in the past two days as investors react to an audit on its business practices. The stock is trading at 381p, which is a few points below Friday’s high of 395p. Still, the stock is below the year-to-date high of 434p.
Boohoo stock has been under pressure since July, when a report in a major British paper raised queries about the safety of its supply chain. The paper alleged that workers at the firm’s subcontractors were mistreating and underpaying the workers.
In response, Boohoo rejected the claim and launched a special audit of its business. This audit published its report and found that the report by The Sunday Times was largely accurate. It also found that the firm has significant issues in its supply chain, which include mistreatment and underpayment. Still, the report said that the firm did not deliberately allow these conditions.
The company responded by saying that it was working to improve the working conditions. It has also said that it will demonstrate that it is possible to pay workers well and remain profitable when it opens its first manufacturing facility.
Analysts remain relatively optimistic about Boohoo and its stock price. Analysts at Citi said that the company had issued a robust response to the allegations and that they did not expect the measures will have significant cost implications.
In July, when the allegations came out, analysts at Barclays lowered their price target for the shares to about 350p. Those at Credit Suisse maintained an optimistic stand on the shares and predicted that they would climb to 440p.
Focus now turns on the company’s financial results that will come out on Wednesday. Analysts expect that the firm will record better results, in part because more people rushed to buy clothes when the lockdowns ended. They are also to hear the specific plans the company has on dealing with the crisis.
The daily chart shows that Boohoo stock price rose sharply on Friday when the company released its audit. The shares reached a high of 395p, which is just 5 points below the resistance of 400p. The chart also shows that the price managed to stay above the rising trendline that is shown in orange. It also remains above the 50-day and 100-day exponential moving averages.
Therefore, even with the current volatility, I suspect that the share price will remain bullish, with the next target at 434p. On the flip side, a move below the support at 300p will invalidate this trend.
Read my initial analysis on Boohoo share price performance when the supplier scandal started.
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