It’s now or never for Boohoo (LON: BOO), the embattled British e-commerce company, as its stock remains near its record low. After soaring to 433p in 2020, the BOO share price has plummeted to $35, erasing billions of pounds in value. Its market cap has retreated to £443 million from a record high of £6.62 billion.

Boohoo had a spectacular rise after being started in 2006 by Mahmud Kamani, who is still one of the biggest shareholders. It did well as it provided stylish yet affordable clothes through its website.

The company recorded strong growth over the years as the number of users in its website jumped. Data shows that its annual revenue jumped by 97% in 2018 to £580 million. This growth accelerated during the Covid-19 pandemic, hitting a record high of £2.7 billion in 2022.

In this period, the company moved from one crisis to the other. The most damaging was allegations of workforce issues in its Leicester plants. This, coupled with an overall slowdown in retail, saw its revenue plunge by 21% in 2022. 

Boohoo also moved from being a highly profitable company to a loss-making one. Its pre-tax profits peaked at £104 million in 2021 to a loss of £59 million in the last financial year. The most recent half-year results showed that it had a loss of £30 million.

Further, the company sees its performance remaining under pressure for a while. The management sees its annual revenue falling by between 12% and 17% in FY24 while its adjusted EBITDA margin will be between 4% to 4.5%.

In addition, the management is working to boost its sales and focusing on profitability. It is investing in international growth, especially in the United States, and reducing its costs. In line with this, the firm is considering shutting down its model facility in Leicester, which will lead to about 100 job losses.

It is unclear whether Boohoo will achieve its near-term and medium goals of streamlining its operations. What is clear, however, is that the company has a powerful backer. Mike Ashley, who has a net worth of over £5.4 billion, has been buying the stock aggressively. 

Frasers, his company, now owns 17.2% of Boohoo. Some analysts believe that Frasers will likely buy the company. Another thing is that some short-sellers have started to cover their positions as the short interest has dropped from over 10% in 2023 to 4.5%.

Boohoo short positions

The other clear thing is that UK inflation is moving downwards, which is a positive thing for consumer discretionary companies like Boohoo. Low inflation could also lead to Bank of England and the Federal Reserve cutting rates. These companies do well in such periods.

Boohoo share price chart

Technically, there are signs that the Boohoo share price has bottomed. It has found strong support at around 30p, where it failed to move below since 2022. This is a sign that some accumulation is going on.

Therefore, there is a likelihood that the stock price will bounce back in 2024 if the company publishes strong financial results. If this happens, the key level to watch will be the psychological point at 50p followed by 60.50p, its highest point in April 2023. This is in line with my recent Boohoo forecast.

The post What’s going on with the Boohoo share price in 2024? appeared first on Invezz