The Boohoo share price crashed by more than 23% on Thursday after the company warned about its growth and profitability. The BOO stock tumbled to a low of 106p, which was the lowest level since November 2016.
The Boohoo stock price has tumbled by more than 75% from the highest level in 2020. This decline has brought the company’s market capitalization to just 1.45 billion pounds.
The weakness started when a media report cited the operating conditions in the company’s Leicester factories. It has never recovered since then. The situation worsened two months ago when the company warned about its growth. Worse, it has seen higher operating costs as the price of cotton, transport, and labour has risen.
On Thursday, the company downgraded its profit and revenue guidance. It attributed this performance to the rising supply chain bottlenecks and the rising inflation. Worse, the firm said that it has seen significant returns in the past few months.
It expects that its net sales growth will be between 12% and 14%. This is significantly lower than the previous guidance of between 20% and 25%. It also warned about the rising concerns about Omicron.
Therefore, while the Boohoo share price is extremely cheap, buyers should exercise caution because the situation could get worse in the coming months.
Boohoo share price forecast
I have been warning about Boohoo for a while now. My last warning was actually on Tuesday when I warned that the stock would continue falling. This was accurate as the stock tumbled to the lowest level in a few years.
A look at the weekly chart shows that the Boohoo share price has collapsed in the past five consecutive weeks. Worse, the weekly losses are continuing. It is even forming a death cross, which happens when the 50 and 200 moving averages make a crossover.
Therefore, for now, the stock will likely keep falling as bears target the next psychological level at 90p. This view will be invalidated if the stock rises above 120p.