Asos Shares: Here’s What Will Turn Goldman Sachs More Positive

Goldman Sachs maintained its Sell rating on Asos (LON: ASC) in a recent note reacting to the online retailer’s latest trading update. 

The investment bank told investors that stronger earnings and free cash flow growth would be key to turning more positive on the stock.

In its first-half (H1 2025) trading update, Asos reported that currency-adjusted revenue declined 13%, in line with consensus expectations. 

However, adjusted EBITDA came in ahead of expectations, with the company compiling consensus estimates of £34 million, representing a 2.6% margin.

The improvement was driven by strong gross margin development, which benefited from lower markdowns and disciplined cost management. 

Notably, Asos' own-brand full-price sales returned to growth, aided by the company’s Test & React model, which now accounts for more than 15% of own-brand sales.

Goldman Sachs currently has a 12-month price target of 390p on Asos shares. After a recent rally, Asos currently trades around the 304p a share mark.

The bank outlined several upside risks to its current stance, including a stronger-than-expected consumer environment, improving online penetration, and a sharper-than-forecast recovery in gross margins as inventory normalises. 

Goldman said the scaling of the Test & React model and the successful roll-out of Partner Fulfils could also boost performance.

However, for the bank to adopt a more positive outlook on Asos shares, it would need to see a “return to profitable market share gains, stemming from the successful scaling of the Test & React model for the ASOS own brands, and roll-out of Partner Fulfils for the partner brands.”

“To the extent that this drives stronger earnings and free cashflow growth, it could drive a higher ASOS target valuation, and a more positive view on the shares,” stated Goldman.

Asos is set to release its full H1 2025 results on April 24.