Broker snap: Jefferies upgrades ASOS by two notches

4th Jul 2013 08:23

Jefferies has raised its rating for online fashion retailer ASOS from 'underperform' to 'buy' and more than doubled its target price, reversing an 'ill-judged' downgrade made earlier in the year.The broker's ratings cut back in January was based on gross margin compression and the thought that the withdrawal of long-standing operating margin guidance would weigh on the stock."It didn't. Burgeoning revenue growth carried the story and the resultant outperformance made for a poor call," admitted analyst David Reynolds.Since the start of 2013, the stock has surged by over 50%.Reynolds said that brand momentum is advancing, with High Street chain Zara in its sights after moving ahead of H&M.He also hailed the company senior management team with Chief Executive Officer Nick Robertson and Chief Financial Officer Nick Beighton leading the company "with verve and aplomb"."It is very difficult to find a better group of senior managers and communicators, and they have built a strong management bench over the last year. Simply put, the most effective management team we have encountered," Reynolds said.The broker has hiked the target price to 6,200p, from just 2,199p previously. "While we still have concerns regarding returns rates and the developing market opportunity, neither of these should materially impact the revenue growth profile, although there may be a margin impact."The stock was up 2.01% at 4,210p by 08:21 on Thursday.