The ASOS (LSE: ASC) share price has surged higher over the last few months. Back in early April, you could have picked up ASOS shares for a little over just 1,000p. Today, they’re changing hands for around 4,700p. That equates to a rise of about 370% in just over five months.
Can shares in the AIM-listed online retailer continue to climb higher? Many analysts believe so. Here’s a look at some recently published broker price targets for ASOS shares.
ASOS share price targets
In August, a number of major brokers published price targets for ASOS above the current share price. These included:
Berenberg, which reiterated its price target of 5,700p on 13 August
Jefferies, which increased its price target to 5,900p on 17 August
HSBC, which lifted its price target to 6,030p on 18 August
Bernstein, which reiterated its price target of 5,100p on 18 August
Goldman Sachs, which reiterated its price target of 5,700p on 21 August
Clearly, many brokers expect ASOS’s share price to continue moving higher. The average of these five price targets is 5,686p – roughly 21% higher than the current price.
3 reasons ASC shares can keep rising
Personally, I wouldn’t be surprised to see ASOS’s share price rise to that level in the not-too-distant future. There are a few reasons why I think the stock can keep climbing.
Firstly, Covid-19 has accelerated the shift to online shopping. This is going to benefit ASOS significantly at the expense of traditional retailers. “The pandemic has digitised whole new sections of the population,” says Clive Black, retail analyst at Shore Capital. “Online is here to stay.” On top of this, demand for comfortable, work-from-home clothing, which ASOS sells plenty of, is on the rise.
Secondly, ASOS issued a fantastic pre-close trading update on 12 August. In this update, it advised that sales and profit for the full year are expected to be “significantly ahead of market expectations.” Revenue growth for the year is now expected to range 17% and 19%, which is excellent given the economic backdrop.
Management also sounded very confident about the future, stating: “We have increased confidence that ASOS will continue to progress as one of the few truly global leaders in fashion retail.”
Third, brokers have recently been upgrading their earnings per share (EPS) forecasts significantly. In the last month, the consensus EPS forecast for the year ended 31 August has increased 54.4p to 103.2p. For the year ending 31 August 2021, it’s increased 25.7p to 105.6p. This kind of upgrade activity tends to power a stock higher.
All things considered, I believe the outlook for ASOS shares remains favourable. The stock isn’t cheap (its forward-looking P/E ratio is about 47) however, I think it deserves a high valuation due to its growth potential. At current levels, I remain a buyer.
Edward Sheldon owns shares in ASOS. The Motley Fool UK has recommended ASOS and HSBC Holdings. 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.