​​ASOS faces major hurdles ahead of Christmas trading update

​​​ASOS faces major hurdles ahead of Christmas trading update

​ASOS share price remains in the doldrums ahead of Christmas update.

​Fallen fast-fashion titan ASOS has endured a tough year, and while there are signs of improvement, there is a long way to go before it can return to its post-pandemic highs.

​Despite the challenges faced by ASOS, there are some positive signs for the company. While adjusted revenue fell by 11% for FY 2023, the company has implemented a speedier model of moving products from design to the website in just two weeks, which shows promise for future growth. Additionally, gross margins have recovered over the last year, and cash generation has rebounded in the previous two quarters.

​However, ASOS still faces tough times ahead. The company experienced a significant increase in net debt, and its small profit in 2022 turned into a loss of £70.3 million. Sales are also expected to decline further in 2024, with estimates ranging between 5% and 15%. Furthermore, ASOS continues to face competition from rivals like Shein, which are eating away at its market share.

​While a recent update from Next pointed to signs of strength in UK consumers, ASOS will need to navigate these challenges and find ways to differentiate itself in order to regain momentum and drive growth in the future.

​Technical analysis on ASOS share price

​The December rally in the ASOS share price to a three-month high at 450 pence has been followed by another down leg with the share trading down by over 11% year-to-date.

​The company’s share price dropped by over 15% from its December peak and has this week tested its late-November low at 372.0p which has so far held.

​ASOS Daily Candlestick Chart

​A slip through the late-November low could lead to the August to September lows at 360.9p to 357.5p being revisited. Further down lies the November trough at 344.4p.

​For any kind of potentially bullish reversal to become remotely possible, the March-to-January downtrend line at 436.2p, December peak and 200-day simple moving average (SMA) at 250.1p would need to be exceeded on a daily chart closing basis.

​Only then could another attempt at reaching the September peak at 474.2p be made.

​For a long-term technical bottoming formation to be formed a rise and weekly chart close above the September high at 474.20p would need to be seen, something which currently looks pretty unlikely.

​Analysts recommendations and IG sentiment

​Fundamental analysts are rating ASOS as a ‘hold’ with Refinitiv data showing 2 strong buy, 3 buy, 12 hold, 7 sells and 1 strong sell - with the mean of estimates suggesting a long-term price target of 394 pence for the share, roughly 3% above the share’s current price (as of 5 January 2024).

IG sentiment data shows that 96% of clients with open positions on the share (as of 5 January 2024) expect the price to rise over the near term, while only 4% of clients expect the price to fall. Trading activity of IG’s clients today shows 83% of buys but this week 59% of sells.