Is ASOS’ Driving Change agenda bearing fruit?
Fundamental analysis of the ASOS share price as its share price remains under pressure.
![ASOS](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/news-article-image-folder/bg asos 987987987.png/jcr:content/renditions/original-size.webp)
Is ASOS’ Driving Change agenda bearing fruit?
Asos, faces obstacles in achieving its mid-term revenue target of £7 billion and a 4% Earnings Before Interest and Taxes (EBIT) margin by 2033. The growth in online sales has been slower than anticipated, and the outcomes of its Driving Change strategy remain uncertain. It called for a renewed commercial model, stronger order economics and a lighter cost profile as well as a robust and flexible balance sheet.
Nevertheless, there are encouraging signs of improved profitability and cash flow as the company concentrates on selling items at full price and effectively managing its inventory. However, a major hurdle lies in the company's ability to stimulate sales growth, which necessitates a shift in customer behaviour away from seeking discounts.
Asos intends to expand its partnerships, with the aim of these collaborations accounting for 5% of Gross Merchandise Volume (GMV) within the next 2-3 years and 25% in the long term. However, it is improbable that this distribution channel will significantly increase the EBIT margin to the targeted 8% due to the associated higher costs.
At 36 times earnings, the shares actually trade right around their five-year average, after peaking at 68 times earnings. But with so much uncertainty around its plans and the growth of competitors like Vinted, investors may deem this too high a multiple given the risks around the outlook.
ASOS analyst outlook
![ASOS analysts](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/content-2-chart-images/ASOS_analyst_17072023.PNG/jcr:content/renditions/original-size.webp)
Refinitiv data shows a consensus analyst rating of ‘hold’ for ASOS – 4 strong buy, 2 buy, 18 hold and 4 sell - with the median of estimates suggesting a long-term price target of 500 pence for the share, roughly 46% higher than the current price (as of 17 July 2023).
![ASOS IG](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/content-2-chart-images/ASOS_IG_sentiment_17072023.PNG/jcr:content/renditions/original-size.webp)
IG sentiment data shows that 99% of clients with open positions on the share (as of 17 June 2023) expect the price to rise over the near term, while 3% of clients expect the price to fall whereas trading activity over this week shows 75% and this month 56% of buys.
ASOS – technical view
The swift decline in the ASOS share price following its March-to-early May range trading phase has taken it to levels last traded in October of 2009.
The company’s share price, which trades at -36% year-to-date, dropped by over 40% since May on disappointing half-year results and remains in a clearly defined downtrend.
ASOS Monthly Candlestick Chart
![ASOS Monthly chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/content-2-chart-images/ASC_2023-07-17_14-04-36.png/jcr:content/renditions/original-size.webp)
Even though ASOS’s share price managed to so far stabilise above its June and current July lows at 323.00p to 322.90p, downside pressure may soon push it through those lows towards the July 2009 low at 306.8p and the psychological 300p mark.
For any kind of potentially bullish reversal to gain traction, the mid-May and June highs as well as the 55-day simple moving average (SMA) at 424.90p to 475.8p would need to be exceeded on a daily chart closing basis.
ASOS Daily Candlestick Chart
![ASOS daily chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/content-2-chart-images/ASC_2023-07-17_14-21-21.png/jcr:content/renditions/original-size.webp)
Only then would the March-to-July downtrend line and December 2022 trough at 486.4p be back in sight.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/Rebrand/Article_banners/Shares-global-component-banner.jpg/jcr:content/renditions/original-size.webp)
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.