The Boohoo Group PLC (LON: BOO) share price has risen 7% in the past week after bottoming at the 178p support level on 15 September 2021. Will the rally continue?
Well, the latest rally was a welcome relief for Boohoo’s long-term investors, who have had to deal with a 40.96% decline in the retailer’s share price since January. The losses were much higher before this week’s rally.
The buyers seem to be finally in control of Boohoo’s share price given the latest rally, but the company’s shares are now trading at a significant resistance level. Nevertheless, a break above the 204p level would signal further bullish momentum.
Boohoo’s fundamentals are pretty solid given that it grew its six-month revenues by 20%, according to its latest earnings report. However, the fashion retailer has suffered from shrinking margins driven by higher operating costs.
The fashion retailer’s shrinking margins saw its income decline by 60% during the six months. Other factors that contributed to its lower margins included supply chain issues and one-off COVID-19 related costs.
Boohoo capital investments also ate into its profitability as the firm now expects to invest £275 million in capital projects compared to the initial estimates of £250 million.
However, the fashion retailer may benefit from rising wages in the UK and globally, which would leave most consumers with higher disposable incomes to spend on fashion items, especially clothing.
Other positive factors that could push Boohoo prices higher include higher sales figures, which could compensate for the lower margins and the growth of its US business.
While Boohoo is a major fashion brand in the UK, the retailer has yet to establish a solid brand in the US and is currently targeting expanding its operations in the country, resulting in much higher sales in the future.
The latest rally in Boohoo stock does not mean that we are in a strong rally but is a step in the right direction. The retailer’s shares still look cheap for those interested in buying them.
*This is not investment advice.
Boohoo share price.
Boohoo shares have been up 7% over the past week. Will the rally continue?
Should you invest in Boohoo shares?
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