Does the ASOS share price make it a no-brainer buy now?

At ASOS The share price (LSE: ASC ) has fallen almost 90% in five years, despite rising alongside other online sales in 2020, one of several driven by Covid.

But it was just a blip, and the shares soon fell again. Still, I’ve been looking at ASOS and my fellow fashion retailers Bowo Group. And see things I like about my ex.

Both prices remain mostly in step over the past year. But when boohoo went up in 2023, ASOS was already in the tail.

Also, the forecast until 2025 does not show boohoo making any more profit. But that’s what ASOS does.

the price is low

City People seems to think that ASOS should be profitable by 2024. And it will give a price-to-earnings (P/E) ratio of 16.

ASOS P/E has reached over 120 in 2019 and, well… maybe it’s better not to think too much about that day.

Whether a P/E of 16 is a good value is now up for debate. A lot depends on how much inflation and interest rates are, and how much money you have to spend on clothes.

But look ahead to 2025, and pundits think the P/E will drop to less than 10. If that happens, I can make ASOS stock look like a steal right now.

Shortening

One thing that scares me a little. It is the third most shorted stock on the UK market today. That’s according to the Financial Conduct Authority (FCA), which considers 5.7% of its shares sold short.

Why? Well, hedge funds clearly think that stock prices are going down further. But they tend to have a short-term view.

And the prices held by the shorter ones may make them better buys for long-term investors. That is, if they were wrong about the company.

results

For Q1 this year, ASOS posted revenue of over £1.3bn. That would be £5.2bn for the full year, if we see the same thing four times. Q1 doesn’t include Christmas time, but I’m really looking forward to it.

But the board said we should see better profitability and cash flow in the second half of the year. The full year must still end with cash flow, but it must be less than £100m.

I think these positive H2 signs look good for a bullish forecast for the next few years.

Result

ASOS is due to post results for the first half on 10 May. We will also hear news about March and April trades. So it looks like it should be a key date.

If it improves the outlook for the second half, it might make the hedge fund think again? I don’t know.

But in the end, I don’t care what they think. I only care about the long-term for ASOS.

Now, I can’t rate it for nothing. But even with the obvious risks, I like what I see. And I have high hopes for the results of the first round.