Why I believe Boohoo’s share price can keep rising

Boohoo.com plc (LON: BOO) shares are trending up again. Edward Sheldon believes there are more gains to come.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Between late September and early April, Boohoo’s (LON: BOO) share price experienced a sizeable pullback, falling from around 265p down to 140p. That’s quite some correction. Having said that, the stock did rise an exponential 900% between 2015 and mid-2017, so a correction was always likely at some stage. 

Yet in the last month, sentiment towards Boohoo shares seems to have improved, and the stock is now trending upward again. Already, the shares are back at 200p. Is it too late to get on board now? I don’t think so. I believe there’s plenty more to come from this fast-growing online clothes retailer. Here’s why.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Exceptional numbers

Boohoo released full-year FY2018 results a few weeks ago, and the numbers were outstanding. Revenue surged 97% to £580m, while adjusted diluted earnings per share rose 47% to 3.23p. Of particular note was the performance of subsidiary PrettyLittleThing, which enjoyed meteoric revenue growth of 228% on the year before. When you consider that the UK clothing sector is struggling significantly, these numbers are all the more exceptional.

Winning model

The numbers suggest that Boohoo clearly has a winning business model. I see the stock as a play on the millennial generation, who have an entirely different set of consumer habits to older generations. Whereas in the past, consumers might head to the high street and visit Marks & Spencer or Next for new clothes, these days, millennials are more likely to buy a fashionable new shirt or dress through Instagram while watching Netflix. And Boohoo has set itself up to capitalise on this trend. This was reinforced to me last week in central London when sharing an Uber Pool taxi with a girl in her 20s. Within 30 seconds of jumping in the cab, she was browsing Boohoo’s PrettyLittleThing on her mobile. With its offering of the latest fashion trends at bargain-basement prices, all through an online/mobile platform, Boohoo is onto a winner.


Sure, Boohoo shares aren’t cheap. With City analysts expecting earnings of 3.8p per share for FY2019, it currently trades on a forward-looking P/E of 53. But is that expensive on a relative basis?

Over the years, larger rival ASOS has consistently traded at high valuations. Today, it trades on a forward-looking P/E ratio of 65. Yet that hasn’t stopped the stock delivering superb returns to shareholders. Over the last decade, it has gained over 2,000%.

Compared to ASOS, Boohoo has a lower P/E to growth (PEG) ratio. Using trailing earnings figures, ASOS has a PEG ratio of 3.4. In contrast, Boohoo sports a ratio of just 1.3, suggesting that the stock offers better value relative to its growth.

Given that City analysts have a price target of 248p for Boohoo, 23% above the current share price, I don’t think its high valuation is a deal-breaker. 

Bullish chart

Boohoo chart

Source: Stockopedia

Lastly, I also like the set-up of the chart at present. While I’m no technical analysis guru, it looks to me like the short-term downtrend has been broken, meaning that the stock could continue moving upward from here.

It’s important to remember that a stock like Boohoo comes with plenty of risks, given its high valuation. It’s not the kind of stock you put your life savings into. However, for those with a higher risk tolerance, I believe the shares have considerable long-term potential as a growth play.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Edward Sheldon owns shares in Boohoo.com. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo.com. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Tired woman sleeping on London underground
Investing Articles

5 steps to monthly passive income streams of £500

Aiming for regular passive income streams, our writer walks through five key steps he would take.

Read more »

Business people shaking hands
Investing Articles

Director dealings: HSBC, National Grid, Taylor Wimpey

Director dealings can indicate whether a company's doing well. So, here are this week's director dealings from three of the…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

2 lesser-known stocks with 10% dividend yields!

With sky-high inflation, sizeable dividend yields can help my portfolio grow. These two stocks are paying 10% on average.

Read more »

Businessman pulling out wooden brick from toppling stack
Investing Articles

Is the Woodbois share price a bargain – or a value trap?

The Woodbois share price has seen big swings recently. Our writer considers why and explains his response.

Read more »

Electric cars charging in station
Investing Articles

Here’s why NIO stock is my top EV pick!

NIO stock had been one of the worst-performing shares over the last year, but it appears to have bottomed out.…

Read more »

Risk reward ratio / risk management concept
Investing Articles

The JD Wetherspoon share price has fallen 45% — should I load up?

The JD Wetherspoon share price has shed almost half its value in the past year. Should our writer buy another…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Down 50%, is the Scottish Mortgage share price a bargain in plain sight?

The Scottish Mortgage share price has lost half its value in recent months. Is it now a bargain for our…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A cheap UK share for the cybersecurity boom!

I'm backing this UK share after its share price collapsed this week. In fact, I've recently added this cybersecurity stock…

Read more »