Bullish: Alan Oscroft
ASOS (London Stock Exchange: ASC) There must have been ups and downs. When you create a new sales and distribution model, especially at this scale, this is what you get. But the current plunge in stock prices has severely hit confidence.
Brexit costs, rising freight rates, other cost inflation, and additional headwinds have all weakened the latest full-year performance. As a result, the company’s gross profit margin dropped to 45.4%. Oh, it’s a bit shocking that CEO Nick Beighton resigned without a replacement.
These heavy news, coupled with winter concerns about serious supply chain problems, caused stock prices to plummet. In the past 12 months, they have now fallen by nearly 50%.
But do you know what this says to me? Say buy. When growth stocks encounter obstacles, I like it, and those who only expect perfection sell stocks and run. It provides me with a buying opportunity.
ASOS stock is now trailing P/E ratio Approximately 19. Only a few years ago, they were still around 80. Yes, it was too high at the time. To be fair, this is a bit misleading, because the company expects a lower pre-tax profit in fiscal year 2022. According to current guidance, this may push the P/E ratio to around 28.
But I believe this is still very low, because I really think that long-term growth potential still exists.I already have boohoo Stocks, but ASOS is now at the top of my buying list.
Alan Oscroft has no position in ASOS. Alan Oscroft owns shares in the boohoo group.
Bearish: Rupert Hargreaves
ASOS is a pioneer in the field of online fashion, but the company seems to have been struggling to capitalize on its position in the market. Its profit margin is half that of its peer Boohoo, and competitors are squeezing into its turf.
Last year, the company experienced a sales boom as people turned to online shopping during the lockdown. Unfortunately, ASOS has been unable to sustain this expansion.
Costs are increasing and customers are returning to old shopping habits. These include more offline shopping and return more products.
Therefore, with rising costs, ASOS’s profit margins are under pressure. With the impact of these pressures, the company recently warned that next year’s profits may fall by as much as 40%.
Not only is this a disappointing update for investors, but the fashion giant also revealed that CEO Nick Beighton will step down after six years in the position.
These challenges put companies in a difficult position. It faces increasing pressure from competitors, rising costs, and supply chain disruptions, and now the company has lost its CEO. The treasurer of ASOS is now in charge of the company’s daily operations.
Currently, the organization needs an experienced CEO to lead the group to meet the above challenges.
Considering all the above factors, I will not buy stocks for my portfolio today. Many of its challengers have better prospects and a more focused business model, which shows that they are better prepared for future obstacles.
Rupert Hargreaves does not own shares in ASOS or Boohoo.
Motley Fool UK recommended the ASOS and boohoo groups. The views expressed by the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a variety of different insights, We are better investors.