Boohoo share price: opportunity or trap?

The Buhu (LSE: BOO) The share price fell more than 20% in the first transaction this morning. It spent a catastrophic year for the company’s stock. It has dropped 40% in the last 12 months.

And recent profits have wiped out all of the company’s epidemic profits and then some. After the Boohoo share price hit an all-time high of around 413p in mid-June 2020, as the group benefited from the growing order volume in the epidemic, the stock is now back below 300p যে the level at which it started in 2020.

Boohoo was one of the most sought after stocks on the London market. So, after this fall, I started to think that the company has an opportunity that is very good to pass.

What’s behind the fall?

Whenever I come across a stock that has declined significantly, I try to figure out why it performed before it took a position.

Shares of the online fast-fashion retailer are trading lower today as it announces that its spending will be higher than expected in the current financial year. Management further warned that sales growth could be in the range of 20% to 25% by February 2022 after directing a 25% increase.

This low growth forecast is a new level of frustration for investors.

Buhur’s sales jumped into the epidemic as consumers stuck at home flocked to his online offer. However, since the economy has revived, the number of options for consumers has increased. At the same time, the contestants got their performances together. Boohoo had online retail facilities in the first half of 2020, but the epidemic has forced other retailers into their game.

The company is struggling with reputable issues. It has been accused of paying its employees low wages and providing misleading prices for customers in the United States.

Management has promised to rise above labor problems and is investing heavily to improve conditions. This seems to be one of the reasons for the increase in costs.

Boohoo outlook for share price

Considering all of the above, it is challenging for me to establish whether the stock is an opportunity or a trap at the current level.

It is clear that the group faces some important challenges. Nevertheless, the 20% revenue growth is still impressive. This will come on top of last year’s growth when the company’s revenue grows 41% after a 44% increase for the 2020 fiscal year.

Technically, a company qualifies as a price trap if its ability to make a profit is severely and permanently damaged. Obviously, this is not the case here.

Therefore, I am interested to say that Boohoo share price is not a trap. Instead, it could be an opportunity. As I mentioned earlier, the stock is now trading at one of its lowest valuations in recent memory since the recent fall.

In this case, I would be willing to buy a small speculative position in stock for my portfolio.

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Rupert Hargreaves has no position on any of the shares mentioned. Motley Flower UK is recommended by Buhu Group. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.

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