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Credit Suisse halves target price for Boohoo, cites significant damage to business model

By Alexander Bueso

Analysts at Credit Suisse slashed their target price for shares of Boohoo Group on the back of the deterioration seen in the online fashion group’s sales over the first half.
In a research note sent to clients, analysts Simon Irwin and Antonio Tabet said that it increased their concerns that its business model had been “significantly damaged” by the growth of Chinese rival Shein.

They also highlighted the loss of Boohoo’s domestic sourcing base and the structural increase in freight costs.

So much so that they now assumed that only the UK operations were profitable.

Due to the current degree of uncertainty, they lowered their estimates for the company’s earnings before interest, taxes, depreciation and amortisation in financial year 2023 from £73m to £59m and predicted that margins would only recover by 40 basis points during the following year.

In turn, their target price was cut from 80.0p to 45.0p using a discounted cash flow model with a 3.5% terminal margin on earnings before interest and tax basis.

Their recommendation for the shares was kept at ‘neutral’ and they voiced a preference for the company’s peers, Zalando and Asos.

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