Boohoo share price sparks higher on New Look acquisition rumours

Summary:

Bohoo share price sparked higher today as investors reacted to news that the company was considering to acquire New Look, the troubled retailer.

Boohoo share price is sparking higher today as investors react to news that the company is interested in taking over troubled retailer New Look. The shares are trading at 312p, which is substantially higher than last week’s low of 290p.

New Look, a once iconic British fashion brand, has been under pressure. The firm has struggled with debt worth billions of pounds and a slowing retail industry. The company, which was going through problems before the coronavirus pandemic, has also closed several stores as part of its debt negotiations.

And today, the firm’s landlords are expected to vote against the Company Voluntary Agreement (CVA). This is where a company enters into an agreement with its creditors about its futures. The company usually can continue trading during this process. It will be difficult for the company to go ahead as a going concern. The landlords in question are British Land and Landsec.

This is where Boohoo comes in. The company, which is best-known for being a leading player in the fast fashion industry, is considering buying New Look if the CVA fails. If this happens, New Look will become the tenth brand under Boohoo. Its other brands are boohooMan, Pretty Little Thing, Miss Pap, and Karen Millen. It has grown mostly through acquisitions.

The talk of a deal comes at a time when Boohoo share price has been trading sideways. It also comes at a time when the company has been embattled because of claims of poor working conditions among its suppliers.

However, it also comes at a good time for the company. In the most recent financial year, its revenue jumped by 44% to £1.235 billion. The firm also had more than £240 million in cash and operating cash flow of about £123.7 million. It also had a net income of almost £100 million. In the most recent quarter, the company’s revenue jumped to more than £367 million amid the coronavirus pandemic. It also acquired Oasis and Warehouse for about £5.3 million.

So, is Boohoo a buy? Analysts are generally optimistic that Boohoo stock price will continue rising. Those at Shore Capital, Barclays, and Credit Suisse expect that the shares will rise above 350p.

Boohoo share price forecast

The daily chart shows that Boohoo share price is rising today. It is trading at 312p, which is only a few points above the 50-day and 100-day exponential moving averages. The price is also significantly below this year’s high of 434p. Most importantly, it is below the August 18^th high of 330p. It is also forming an ascending triangle pattern.

Therefore, I suspect that the shares will continue rising as bulls attempt to move above the resistance level at 330p. However, a move below the ascending trendline will invalidate this trend because it will be a victory for the bears.

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