ASOS‘s (LSE: ASC) share price has enjoyed a spectacular run over the last few months. Since mid-March, when ASOS shares briefly fell below 1,000p, they’ve surged back up to 3,400p. That represents a gain of 240%.
Can ASOS’s share price continue to move higher? Plenty of analysts believe it can. In fact, some of them believe the stock can move considerably higher.
ASOS share price: 5,000p target price
In the last week, two major brokerage houses have increased their target prices for ASOS shares.
On Thursday, analysts at Credit Suisse lifted their target price from 3,600p to 4,100p. And then on Friday, analysts at Peel Hunt increased their target price from 3,000p to 5,000p.
It’s the latter broker target price upgrade that stands out to me. Not only is it an increase of a huge 67% (which you don’t see that often), but it’s also nearly 50% higher than the current share price. Clearly, Peel Hunt analysts are bullish on ASOS shares.
Now, I don’t have access to any research notes from Peel Hunt, so I can’t tell you the exact reason they expect ASOS shares to keep rising. However, I can think of a key reason why they’re so bullish right now.
Online shopping is booming
In the wake of the coronavirus, we’re seeing a real acceleration in the shift towards e-commerce.
Indeed, according to analysts at Bernstein, the growth rate of online fashion looks set to triple this year to account for 23% of European fashion sales. Before the coronavirus pandemic, this level of online sales was not expected until 2024.
“The sudden closure of all apparel retail stores across all major global markets has shaken up the channel mix in an unprecedented way this year,” said Bernstein analyst Aneesha Sherman recently. “Five years’ worth of growth achieved in about six months,” she added.
This surge in online shopping is reflected in the trading updates issued by some of ASOS’s major competitors recently.
For example, last week, Europe’s largest online fashion retailer, Zalando, said it was expecting a big increase in second-quarter sales and operating profit.
Meanwhile, UK rival Boohoo advised last week that it would top market expectations for profits and sales again this year after first-quarter results showed revenue growth of 45%.
Looking ahead, online fashion sales as a percentage of total fashion sales is likely to continue increasing. Bernstein analysts believe that by 2030, online fashion sales could rise to nearly 40% of fashion sales.
This means well-established online retailers such as ASOS are well-placed for growth.
I’m bullish on ASOS shares
Personally, I’m pretty bullish on ASOS shares myself. Okay, I’ll admit the valuation on the stock is high. Currently, ASOS shares trade on a forward-looking P/E ratio of around 65. That does add risk to the investment case.
However, I see big potential here in the long run. My belief is that in a few years’ time, ASOS’s share price will be much higher than it is today, thanks to the relentless growth of e-commerce.
Edward Sheldon owns shares in ASOS and Boohoo. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo group. 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.