Since the turn of the year, the Boohoo (LSE: BOO) share price is down over 40%. While the stock saw an impressive rise at the outbreak of the pandemic, its performance since its June all-time high of 415p has been anything but impressive. So, what’s in store next for Boohoo shares? Will investors who bought at the peak ever turn a profit? Let’s take a look.
Growing fast
The firm’s latest set of results was a testament to the speed at which it is growing. The six months to 31 August saw revenues of £976m, a 20% rise on the £817m seen in the same period last year. Although this is a slowdown from the near-50% increase during the first half of last year, it still shows the firm is continuing to head in the right direction. Gross profit was also up 19%. These are positive signs for potential investors like me.
Further growth can also be seen through the firm’s large investment in two new warehouses, capable of supporting up to £4bn in sales. With sales this year expected to be around £2bn, this means Boohoo will be able to increase sales to a large extent without having to invest in more infrastructure. As I expect the business to continue to grow, this is an enticing long-term inducement for me to add Boohoo shares to my portfolio. This makes the current slashed price of 195p seem like a potential bargain.
Another attractive reason why I think now is a good time to buy Boohoo shares is because of the most recent statement from CEO John Lyttle. It shows Boohoo’s ambition for growth, predominantly through its acquisitions. Lyttle states how it helped the firm to reach its target addressable market. A doubling of market share in both the UK and US may point towards the effectiveness of these acquisitions.
Boohoo concerns
While I was keen to highlight the positives from the latest results, there are some concerns that could put me off from buying Boohoo shares. Earnings before interest and taxes (EBIT) fell by 19%, leading to a 20% drop in pre-tax profits. If these figures continue to drop, this could have a negative impact on the share price.
And, as my colleague Roland Head mentioned, Boohoo, like many other firms, is struggling with supply chain issues, as well as labour shortages. Short term, this could pose a major issue for Boohoo.
Should I buy?
So, with it trading at under half the price of its all-time high, is now a good time for me to buy Boohoo shares?
As much as the short-term issues I mentioned above could create a problem for Boohoo, I do not see these as an obstacle. I think long-term the firm’s decision to invest in expansion through new warehouses and acquisitions should put it in a good position in years to come. A continuation in rising revenues is also an attractive reason for me. As such, I think Boohoo would be a solid long-term addition to my portfolio at the current price.