ShoreCap ups Boohoo to 'buy' after share price drop

Shore Capital upgraded online fashion retailer Boohoo to 'buy' from 'hold' on Thursday following a 13% drop in the share price in the last three months.

Analyst Greg Lawless said the company is well positioned as a pure play retailer with its focus on fast fashion across its three brands - Boohoo, PrettyLittleThing (PLT) and Nasty Gal - and has a sizeable opportunity to harness the international growth of the business.

"We think next week’s interims may be a catalyst for investors to look again at the investment case of the group. With the shares down 13% over the last three months, we believe that on balance, the risk is more likely on the upside, and that the fair value of the shares is more likely to be 210p, than the 150p level."

Lawless attributed the 5% drop in the share price over the last month to concerns that the move to a new warehouse for PLT this summer might have caused some short-term availability issues. In addition, he said the profit warning from German online fashion group Zalando this week may have also caused some nervousness among investors in the e-commerce sector.

Lawless also commented on the company's appointment this week of former Primark executive John Lyttle as chief executive officer.

"Appointing an external CEO with proven international clothing credentials and a fresh pair of eyes on the operations of the fast growing international clothing brand is a good thing," he said. He added that the share incentive scheme, which would see Lyttle pocket up to £50m if he meets certain growth targets, is a statement of intent of the ambitions of the group.

At 1245 BST, the shares were up 2.1% to 186.80p.