HSBC upgraded shares of Asos (LON: ASC) from “Reduce” to “Hold” in a note to clients this week, lowering its price target for the stock to 270p from 320p.
The bank highlighted concerns around the company’s U.S. business and ongoing refinancing risks.
“YTD, ASOS shares have fallen c40% on the back of concerns around the US (c12% of sales) consumer, we think,” HSBC analysts wrote. This decline outpaces losses at rival online retailers, with THG down 17% and Boohoo down 23% over the same period.
The stock is currently on a long losing run, closing Thursday’s session at around 257p a share. However, it is up around 1% in early Friday trading.
Despite challenges, HSBC believes “the market has correctly priced this in” and that shares now appear fairly valued.
Analysts highlighted ongoing “significant refinancing risks” related to a £253 million bond due in 2028 with a 14.84% yield but noted that the lack of major fundamental news flow suggests limited downside from current levels.
HSBC has shifted to a discounted cash flow (DCF) valuation methodology from an adjusted present value (APV) approach.
The bank also incorporated the impact of “the mothballing of the Atlanta distribution centre in H2, which is expected to add cGBP15m to EBITDA from FY26 onwards.”
The reduced price target reflects “lower sales estimates leading to lower FCF generation in the outer years” of HSBC’s valuation model.
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