Online fashion retailer Asos has jumped nearly 5% after one of the City's more negative analysts on the stock changed his mind.
In what amounts to a mea culpa, David Reynolds at Jefferies moved his rating from underperform to buy and his target price from £21.99 to a hefty £62. In the market Asos - which issued an upbeat trading statement in mid-June - has added 196p to £43.23. Reynolds said:
An ill-judged downgrade [in January is] reversed here as we evidence high-quality senior management, a massively disruptive business model, continuing brand momentum, positive key performance indicator trends and a true growth dynamic.
[In January] our thought was that gross margin compression and withdrawal of long-standing operating margin guidance would weigh. It didn't. Burgeoning revenue growth carried the story and the resultant outperformance made for a poor call.
While we still have concerns regarding returns rates and the developing market opportunity, neither of these should materially impact the revenue growth profile, although there may be a margin impact.
