Shares plunged last week after the AIM-listed company warned teething troubles at its US warehouse would lead to a 70% drop in profits this year.
But they recovered some of those losses today, rallying 7.5% to 2,397.1p after Morgan Stanley moved the stock to ‘equal weight’ rating, up from ‘underweight’ previously.
The heavyweight investment bank had been bearish on ASOS for the past 18 months, but after the recent share price fall, it reckons the risk-reward is now more balanced.
“ASOS shares are now down nearly 65% over the last year and, in our view, the current levels more fairly reflect our views of the business,” said the analysts in a note to clients.
“We update forecasts for last week's profit warning and lower our price target from 2,200p to 2,100p.
“Although we now sit 40% below consensus EBIT by FY21, we think the current level is reflective of our more conservative estimates (and sell-side consensus does not yet fully reflect last week's announcement). With only 3% downside to our price target, we upgrade to ‘equal weight’.”