Broker snap: ASOS is in a 'sweet' spot, UBS says

10th May 2013 13:47

'Better impossible' may be the most apt title for UBS´s research note on Friday morning for retailer ASOS, except for the fact that it could conceivably get even better. In their own words, "ASOS is in a structural sweet-spot, with global exposure to the fastest growing segment of the clothing market. Management is focused on the long-term growth drivers of the business and, in our view, correctly strikes the balance between disruptive pricing, long term investment in the business and maintaining a sustainable earnings before interest and taxes (EBIT) margin."It is therefore little wonder that the Swiss broker has decided to re-start its coverage of the firm with a 'buy' rating. In fact, its analysts add that the next key launch markets of Russia and China could see further upside to their forecasts.So while an expansion of the company´s EBIT margins is thought unlikely, given the need to re-invest, UBS expects both sales and earnings per share (EPS) to grow in the 25-35% per annum range over the next five years. The target price? 4,500p. Lastly, they point out that the ASOS´s "unique business model, geographical diversity and sustainability of earnings growth are likely to make this a long term core holding in the retail space."AB