MIDAS SHARE TIPS UPDATE: There is more growth in sight for trendsetting Asos – these shares are undervalued
Asos is a phenomenal success story. The online retailer – one of the best known in the business – listed in 2001 at 20p and was first recommended by Midas in 2004, when the shares were 28p. Today, they are 5750p, valuing the group at almost £5 billion.
However, the stock has not fared well over the past few months. In March, the price hit 7730p. But in April, investors were spooked when the company said it would be spending more on logistics and distribution.
Then, last month, there were fears about the impact of a US sales tax ruling and on Thursday the shares fell more 10 per cent – from 6496p – when chief executive Nick Beighton reported a 22 per cent rise in revenue for the four months to June 30 and said sales growth this year would be about 25 per cent.
Most fashion groups would be over the moon with those numbers, but brokers had been hoping that 2018 figures would be close to 30 per cent ahead of last year and there were concerns too about lower-than-expected growth on the Continent.
Midas verdict: For long-term investors, the recent share price dip could represent a good buying opportunity. The group has more than 15 million customers and two-thirds of sales are now generated overseas.
Yes, the group is investing in infrastructure – but that is arguably a positive move. And yes, sales this year will be at the low end of expectations, but profit margins are higher than anticipated. ASOS has done phenomenally well over 17 years, but there is more to come. At 5750p these shares are undervalued.
Traded on: Aim Ticker: ASC Contact: asosplc.com or 020 7756 1000