LONDON (ShareCast) - (Sharecast News) - Analysts at Liberum slashed their target price for shares of Boohoo, arguing that the global supply chain logjam wasn't the only factor behind the online fashion retailer's recent profit warning.
The company's excessively optimistic guidance for the back half of 2022 was also to blame, they said.

"We believe the inflated supply chain costs and weakened delivery proposition will persist for the next 12-18 months," they explained.

Hence, they slashed their estimates for Boohoo's earnings across 2022-24 by over 40%, resulting in a cut to their target price from 360.0p to 200.0p.

Higher supply chain costs were here to stay, the analysts added, telling clients that they would reset at a higher level following the pandemic.

Furthermore, they judged that the company would need to invest in prices and marketing to make up lost ground in the States and in the Rest of Europe.

In turn, that would keep its EBITDA margin below its 10% target out to 2027.

An increased rate of merchandise returns was another source of concern.

However, the analysts continued to be upbeat about Boohoo's longer-term potential and believed that it could hit its medium-term growth targets, because Chinese rival Shein's growth in the US could be in the company's favour in the long-run.

They also said they were "excited" by "developments" at Debenhams, where the opportunity was "substantial".

Changing hands on 0.6 times' their estimate for the retailer's EV/EBITDA in 2023, they believed the shares offered "good long-term value", which led them to reiterate their 'buy' recommendation.

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