Is Boohoo worth 352p a share?

Analysts’ average 12-month price target for Boohoo stands at 352p per share, implying a potential upside for the stock of 20%. But will Boohoo be able to rebound that aggressively after its Leicester factory scandal threatens to cause a slump in sales?

Well, the company’s shares have certainly shown resilience in the face of many challenges, with the stock rebounding more than 40% since mid-July, with the stock finally finding support from investors after losing close to half its value as a result of the allegations made against it.

Boohoo is trading at 294p per share at the time of publication.

Boohoo shares likely to rebound after it addresses working conditions

The online fashion retailer saw its shares take a serious knock after allegations surfaced about its supply chain and the working conditions of factory employees in Leicester who were being paid below minimum wage.

However, some would argue that the sell-off is overdone and arguably presents a major opportunity for investors looking to buy the stock at a discount, especially when you consider the impressive growth it has already accomplished and its resilience in the face of the Covid-19 pandemic.

Prior to the allegations, Boohoo was trading at a 52-week high of 443p per share, with the stock looking particularly cheap, even after rallying 40% since hitting 210p in mid-July.

It is also worth noting that even prior to the sell-off, the online fashion retailer was up 37% year-to-date and even after its crash is only down 1.5% over that period and still outperforming the broader market.

Boohoo remains well-positioned over high street rivals

Despite the online fashion retailer’s recent scandal, the company is still better positioned than many of its high street rivals, which are struggling amid the coronavirus pandemic, with its share price still capable of making significant gains.

High street fashion retailers shares have performed dismally in comparison to their online counterparts, with Next, Hennes & Mauritz AB (H&M) and Zara-owner Inditex all down more than 14% year-to-date.

Online fashion is set to triple this year, accounting for around 23% of all European sales in 2020, with the shift away from the high street accelerated by the viral outbreak, according to analysts from Bernstein.

‘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,’ Bernstein analyst Aneesha Sherman said in a note. ‘[It's] five years' worth of growth achieved in about six months.’

How to trade stocks with IG

Looking to trade Boohoo and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

1. Create an IG trading account or log in to your existing account
2. Enter ‘Boohoo’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade