The Boohoo share price sell-off accelerated on Monday after Asos warned about its business. The BOO stock crashed to a multi-month low of 180p, which was about 53% below the highest level this year. Similarly, the Asos share price has dropped by more than 65% from its highest level this year.
Why BOO is struggling
Boohoo is a fast-growing fast-fashion brand that sells its products in several countries like the US and the UK. The company sells mostly through its website and mobile applications. Its customers are mostly women although its men business is seeing some growth.
The Boohoo share price has been under pressure for months. The problems started in 2020, when the company was accused of labour issues at its plants in Leicester. While the company has made some strides to remedy its issues, its stock has never fully recovered.
The woes continued this year when the company warned about its growth. Most importantly, it is facing significant logistics challenges while the price of cotton has jumped to the highest level in more than a decade. These trends will likely affect both its growth and profitability.
The Boohoo stock price is struggling this week after Asos warned about its business. The firm said that its business conditions were yet to improve. It warned that its profit could fall by as much as 40% this year. Analysts believe that Boohoo too could see a similar decline.
Boohoo share price forecast
The daily chart shows that the Boohoo share price has been in a major sell-off in the past few months. And recently, the shares declined below the key support at $215, which is was the lowest level in October last year. The shares remain below the 25-day and 50-day moving averages. At the same time, the stock has moved to the most oversold level since July last year.
Therefore, while the path of the least resistance is lower, I suspect that the company’s shares will have a brief relief rally as investors rush to buy the dips. Still, in the longer term, the shares will likely find a floor at around 150p.