Will the Boohoo share price recover in September?

Next month will see online fashion giant Boohoo (LSE: BOO) release its latest set of interim numbers. Will these be good enough to help the share price recover and possibly soar? As a holder, I’m certainly hopeful. So, let’s look at why this may and, importantly, may not happen. 

Boohoo share price: ready to rise?

My first reason for thinking the Boohoo share price may be about to rebound relates to current trading.

Assuming that its customers have swapped lockdown threads for party clothes, I wonder if September’s results may prompt an increase in full-year guidance. Boohoo has developed a habit of under-promising and over-delivering over the years but chose not to raise targets when it reported on Q1 trading a few months ago. Now that we’re all free to socialise once more, I’m optimistic it could surprise on the upside again.

There have certainly been indications that business is still booming. Earlier this month, the company announced that it would be investing £500m in the UK over the next five years. In addition to employing 5,000 more people, Boohoo said that it would be further investing in warehouse space and technology. If that’s not indicative of a business in rude health, I don’t know what is.

Tempting valuation

Another reason for thinking the stock might rally is that the company’s valuation has fallen too far. The Boohoo share price is down 17% year-to-date. Based on analysts’ projections, that leaves this top growth stock trading on 26 times earnings.

That’s not exactly cheap. However, BOO also has a price-to-earnings-growth (PEG) ratio of just above 1. Anything around or below this level suggests investors like me are getting a good deal for our money. And with all its recently acquired brands giving access to new markets (such as homewares and cosmetics) and customers, I really don’t think expansion will be an issue.

I’m clearly not alone in thinking that Boohoo should bounce back strongly in time. Non-executive director, Iain MacDonald, bought over £300,000 worth of stock (at a higher price) back in June. It’s surely a good sign when those with an intimate knowledge of the company are investing their own cash.

The flip side

For balance, it’s vital to briefly consider what things may continue to hold the Boohoo share price back. 

There’s a possibility that recent trading may actually disappoint. After all, rival ASOS tumbled back in July after announcing a slowdown in sales. Boohoo could conceivably do the same. Whether this happens or not, confirmation of an online sales tax would be another headwind for the AIM-listed firm.

Despite considerable efforts to address ESG concerns, more damaging headlines can’t be ruled out either. Quite what this would mean for Boohoo’s management is debatable. A significant minority of holders recently opposed the re-election of co-founder Carol Kane to the board following last year’s supplier scandal.

Good probability

On balance, I’m quietly confident that the Boohoo share price has a better chance of recovering next month than dipping further. As such, I’d feel comfortable adding to my stake before August is over.

Then again, it’s the company’s long-term prospects I really care about. On this front, I fully expect the stock to be considerably more expensive in, say, five years’ time. And isn’t increasing one’s wealth slowly but surely what Foolish investing is all about?