Boohoo's share price: a fair reflection of challenging times?

The steep decline in Boohoo's share price

Boohoo has experienced a significant drop in its share price, falling 20% over the past year and nearly 90% over three years. The stock recently hit 52-week lows at 26.48 pence (p) before rebounding slightly to just above 29.00p. This decline coincides with deteriorating financial performance, as evidenced by the company's earnings per share (EPS) turning negative in recent years. The current price-to-book (P/B) ratio of 1.17 suggests that despite the sharp fall, the stock may not necessarily be undervalued.

Revenue resilience amidst profitability challenges

Despite the share price decline, Boohoo's revenue remains above pre-Covid-19 pandemic levels, indicating that demand for the company's products is still robust. This suggests that the primary issues facing the business are related to costs and expenses rather than sales. The discrepancy between revenue performance and profitability highlights the need for the company to address its operational efficiency and cost structure to improve its bottom line.

Management's response and future outlook

In response to these challenges, Boohoo's management is focusing on streamlining costs and has decided not to pay executive bonuses. These efforts to reduce expenses could potentially improve the company's financial performance.

Boohoo analyst ratings

According to London Stock Exchange Group (LSEG) Data & Analytics, analysts are rating Boohoo as between a hold and a sell, with 1 strong buy, 1 buy, 5 hold, and 5 sell classifications. The mean long-term price target is at 36.68p, around 25% above current levels (as of 27 September 2024).

According to TipRanks, the Boohoo share is also rated as a sell (1 buy, 1 hold, and 3 sell) and has a SmartScore rating of "underperform" at 2 (as of 27 September 2024).

Technical analysis on the Boohoo share price

The Boohoo share price, down over 90% from its 433.60 pence Covid-19 pandemic highs, continues to hover above its 26.48p August nine-year low.

Boohoo monthly candlestick chart

The long-term downtrend is clearly entrenched, with the Boohoo share price trading in a sideways trading range for several months, as seen between March and July, before ratcheting down and now trading at a lower equilibrium since early August.

Unlike most shares which have seen a significant rally from their early August lows, Boohoo’s share price remains sidelined, despite having risen by around 12% in early September. Each time the share price rises by any significant amount, sellers use these higher levels to short the stock further, hence the long-term downtrend which remains very much in play.

Boohoo daily candlestick chart

Short-term, the 55-day simple moving average (SMA) at 30.16p caps, with the August to September uptrend line at 27.54p acting as support ahead of the multi-year 26.48p early August low.

While the early September high at 31.50p caps, the odds of a fall through the 26.48p low remain high. If so, the May 2015 low at 23.00p would be eyed. Further down lies the January 2015 trough at 21.00p which may also be reached.

Only a currently unexpected bullish reversal and rise above the March to July highs at 38.00p would make us question our long-term bearish outlook on Boohoo.