Broker Liberum hailed “another standout performance” by upping its target price to 370p from 340p, as the fast-fashion seller raised its profit forecast for the full year.
The AIM-listed owner of Nasty Gal and PrettyLittleThing seems to have nailed the fluctuating tastes of young women, its core target, luring them with astonishingly low prices.
It recently incorporated Karen Millen and Coast to diversify its customer base.
“Boohoo is breaking into new price points and a different demographic, having successfully transitioned to a test and repeat model for the new brands,” analysts at Peel Hunt said in a note, adding there is “significant” medium-term growth opportunity.
The company also benefits from low capital expenditure – only £5mln in the first half compared to group revenue of £565mln – as it does not have any brick and mortar shops.
However, Peel Hunt pointed out its annual sales remain modest against a typical national high street fashion brand, but there is “significant” potential for expansion.
Moreover, growing at such a fast pace needs careful management.
“We cannot fault Boohoo’s expansion efforts so far, but continued growth will require new infrastructure in the future and that brings execution risk,” said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.
The stock, now trading at an all-time high, has fully recovered from last month’s hit after co-founders Mahmud Kamani and Carol Kane sold a combined 50mln shares for £142.5mln.
They still retain 13.1% and 2.7% stakes respectively.
“If you have a personal holding in a business that is doing incredibly well, you might want to realise that,” Adam Tomlinson, an analyst at Liberum, told Proactive on the phone.
“The cynics may say they sold them because things were not going so well but after today’s result we see that is not the case.”
Shares rose 4% to 330.28p on Tuesday afternoon, making it the largest firm on the small-cap index.