The boohoo (LSE:BOO) share price has risen by a modest 2% over the last year. Yet over the past five years, the stock is down 88%. Some bank research teams and brokers have been reducing their share price targets for the coming year, giving a rather negative view for 2025. Here’s what investors need to know.
Details from the experts
On Monday (2 December), the team at BNP Paribas led by Mia Strauss reiterated a target price of 28p for boohoo. For reference, the current price is 34.5p.
Surprisingly, this isn’t the most negative forecast out there at the moment. Of the 13 analysts that cover the stock, six have a Sell rating, six have a Hold rating and only one thinks it’s a Buy right now. The lowest forecast is from the team at Barclays, with a 20p target level.
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Jefferies recently cut the target price from 70p to 30p, citing ongoing declines in sales and profitability.
Of course, analysts’ forecasts and predictions are subjective. It doesn’t mean that boohoo is doomed or that the stock will go below 30p. But when there’s a strong bias towards one direction from a host of brokers, it’s not really a good indication.
Recent problems
There are a few reasons why the stock could keep falling. The ongoing spat with Mike Ashley and Frasers Group doesn’t appear to getting resolved any time soon. This issue centres around the 28% stake Frasers has in boohoo and the influence that its management team is putting on how to run the business. If this escalates next year, I doubt investors will take it well.
Another factor is the financial performance. The half-year results from November showed a fall in revenue and operating profit from H1 2023. This filtered down to an adjusted loss before tax of £27.2m, up significantly from the previous loss of £9.1m.
It’s true that operating costs are falling as the business pushes to become more efficient. Yet this is being more than offset by falling demand, shown by the drop in revenue.
Debenhams could be the spark
One thing that could save the share price could be Debenhams. Net revenue for the brand that boohoo helped to rescue out of administration jumped 68.2%. This bodes well going forward. If the division can expand further then it can provide a source of diversified revenue away from boohoo’s more traditional fast-fashion areas.
Further, if we get a trading statement early in Q1 that indicates a strong holiday season, investors might see this as an undervalued buy for the long term. However, based on the current situation, combined with the broker forecasts, I believe it’s a high-risk option right now.
