- ASOS
- 10 September 2024 13:00:53
Source: Sharecast
Barclays said that over the past three months, it felt that the biggest driver of Asos’s equity story was around its ability to refinance.
"The Topshop transaction/re-fi is now done and removes some of the equity overhang/balance sheet risk into FY26. Our balance sheet analysis suggests that there is FY27/28 debt that could need refinancing, meaning earnings/FCF delivery in the mid-term is important," it said.
Barclays said the outlook remains challenged from a competitive standpoint - e.g. from Shein/Temu/Vinted - and sees a risk to consensus numbers both in FY25 and into the mid-term.
The bank said its slightly lower forecasts are now 22%/15% below Bloomberg consensus adjusted EBITDA for FY25/26, respectively.
"Additionally, with higher interest costs post re-fi and adjusting for royalty payments to the JV, we are now not forecasting positive FCF/earnings per share until FY27, which makes valuation more challenging, in our view.
"With the positive catalyst of the re-fi now played out, we think the focus shifts to Asos's fundamentals, and we view the risk/reward as skewed to the downside."
Amongst other commerce platforms in its EU Internet coverage, Barclays said it prefer names that have positive and accelerating growth with well-capitalised balance sheets and EPS/FCF valuation support in 2026, such as Deliveroo, which it rates at ‘overweight’.
"We see Asos as a relative UW on that basis," it said.
At 1300 BST, Asos shares were down 3.8% at 418.80p.