The Sad Freefall of the Boohoo Share Price – Any Hopes?
The Boohoo share price had a difficult month in November. The BOO stock price initially rose to a high of 205p in November. It then crashed by as much as 21% and fell to a low of 161p, which was the lowest level since March 2020. The stock has retreated in the past three straight weeks.
Why is Boohoo struggling?
At its peak, Boohoo was one of the fastest-growing tech-enabled companies in the UK. At the height of the pandemic, the Boohoo share price rose to an all-time high of 432p. It then quickly dropped after the issue of its Leicester factories emerged.
While the company has implemented measures to solve these issues, the stock has not managed to recover. Indeed, it is about 60% below the highest level last year.
Other things have contributed to the overall underperformance of the Boohoo share price. For example, like other fashion companies, Boohoo is going through the challenge of high cost of doing business. The cost of labour, cotton, and shipping has all gone up.
In addition, the company is facing strong competition from Chinese companies with equally good products. Also, there are concerns about whether the company will manage to see more growth as the UK and US economy recovers. Indeed, the firm recently lowered its forward guidance.
So, what next for the BOO share price? Analysts believe that the stock will ultimately rebound. Besides, Boohoo is a bit undervalued. A DCF valuation finds that the stock is trading at about 55.5% discount.
Boohoo share price forecast
The daily chart shows that the Boohoo stock price crashed sharply on Friday because of the rising concerns about Omicron. As it dropped, the stock managed to move below the key support level at 178.50p, which was the previous YTD low. By this drop, the stock managed to invalidate the double-bottom pattern.
Therefore, the stock will likely keep falling as investors target the key support at 150p. On the flip side, a move above 200p will likely invalidate this view.