UBS says ASOS is in a 'sweet' spot

'Better impossible' may be the most suitable title for UBS´s research note on May 10th for retailer ASOS, except for the fact that it could conceivably get even better. 

 

In their own words, "ASOS is in a structural sweet-spot, with global exposure to the fastest growing segment of the clothing market. Management is focused on the long-term growth drivers of the business and correctly strikes the balance between disruptive pricing, long term investment in the business and maintaining a sustainable earnings before interest and taxes (EBIT) margin." 

 

In fact, its analysts add that the next key launch markets of Russia and China could see further upside to their forecasts. 

 

So while an expansion of the company´s EBIT margins is thought unlikely, given the need to re-invest, UBS expects both sales and earnings per share to grow in the 25-35% per annum range over the next five years. 

 

The target price? 4,500p. 

 

Lastly, they point out that the ASOS´s "unique business model, geographical diversity and sustainability of earnings growth are likely to make this a long term core holding in the retail space."