New York –Asos PLC (LON:ASC) saw its market’s value cut by over 1 billion pounds in December after issuing a shocking profit warning.

The sell-off was overdone, according to analysts at RBC Capital, but still dragged the company’s position in the UK’s alternative investment market (AIM). Now, the online fashion retailer looks cheap, according to RBC Capital, which thinks that the sell-off was overdone, although it has created an “opportunity” to buy the stock, reports ‘Proactive Investor’.

In December, Asos caused a commotion in the fashion industry after slashing its full-year forecasts and warning that it had seen an “indicant deterioration” in sales in November, mainly due to unseasonably warm weather affecting the demand for its winter ranges.

Within a matter of days, Asos’ stock price almost halved, dropping to 2,100 pence per share. This meant a 1 billion pounds’ worth of lost capitalisation for the company.

On the back of that profit warning, RBC cut their rating on the stock, although didn’t give up on Asos’ potential. “[The downgrade was] mainly because of the macro uncertainty that has increased rather than a change in our view on the company’s relative positioning and ability to take market share,” explained the broker in a research note.

“The industry backdrop significantly deteriorated in 2018, and despite its structural tailwinds, Asos is evidently not immune.”

Looking ahead, analysts at RBC “continue to believe that its industry-leading proposition and pace of innovation will enable Asos to continue taking share in its large addressable market.”


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