Boohoo (LON: BOO) share price popped by more than 8% on Thursday as investors cheered the strong trading statement by Asos and Tesco. The stock soared to a high of 42.32p, the highest point since December 13. It has soared by more than 37% from the lowest point in 2022.
Is Boohoo a good turnaround story?
Boohoo stock soared on Thursday as investors predicted that it will be a good turnaround stock. After benefiting from growth of e-commerce sales in 2020, the company has been struggling lately. It is facing strong competition from the likes of Shein.
Boohoo also was hit by a surge in inflation, more returns, and soaring costs in its key locations like in the UK. It also suffered from PR issues after an undercover journalist accused it of slave-like working conditions in one of its warehouses.
Still, as I wrote in this article, there was still value in Boohoo. The firm is a well-known British brand that is popular among its demographic target. This was evidenced by the millions of customers it served in 2023.
Therefore, there is a likelihood that Boohoo will be a good turnaround stock to buy. The firm will likely solve some of the challenges it has faced in the past few years. I also believe that the company’s valuation is remarkably cheap, which could see it attract bids by American private equity companies.
Boohoo share price rose after Asos published better-than-expected financial results. Its Christmas sales dropped by 8% in the final four months of the year. Its group sales for the final four months of the year dropped by 3%. Its CEO said that the firm was prioritising profitability and capital allocation instead of growth.
It is also worth noting that Boohoo’s insiders have maintained their positions in the company, which is a sign of confidence. As we have seen with Elon Musk, many insiders tend to sell shares when their stocks are falling. Musk has sold Tesla shares worth billions of dollars as the stock imploded.
Boohoo share price forecast
The daily chart shows that BOO stock price found a strong bottom at 31.36p in 2022. It struggled moving below that level several times since September. The stock is consolidating at the 25-day and 50-day moving averages while the Average True Range (ATR) has continued falling. Therefore, the shares will likely have a bullish breakout in 2023 as buyers target the key resistance level at 55p.