Sharecast - Bank of America (NYSE:BAC) Merrill Lynch upgraded Boohoo and Asos on Friday as it took a look at European online retail.
Asos and rival Boohoo were both lifted to ‘buy’, from ‘underperform’ and ‘neutral’ respectively.
"We are still prudent on consumer demand and model almost no sector growth in 2023 - but argue this is well understood by the market: caution on these stocks has brought 2023-2024 profit expectations down 55-90% since January 2022, & valuation to 13x EBITDA 2024, 35% below pre-pandemic," it said.
Bank of America said that for the shares to recover from here, these companies just need to convince the market they will survive.
"This is where we are more positive: all companies in our coverage have implemented cost-savings measures, and several of the macro-related headwinds we recently saw - freight, raw materials, energy, inventory glut - are reversing.
"This should be enough to go through 2023, even for Asos and Boohoo, which have the most stretched balance sheets in our view."
It added: "Putting it all together: expectations now look fair, if not prudent, on a sector trading at very low levels and even if we may be early on our call, that is enough to turn positive here, in our view."
4imprint said on Friday that pre-tax profit for 2022 is expected to be above the upper end of the range of analysts' forecasts, and not less than $100m following a particularly strong finish to the year.
In a brief update, the company - a direct marketer of promotional products - said unaudited group revenue for the year to the end of December was around $1.14bn, up 45% on 2021.
The unaudited net cash balance for the year-end was $86.7m, up from 2021’s $41.6m, leaving the group "very well-funded" entering the 2023 financial year.
"The board is delighted with the group's progress in 2022, which reflects clarity of strategy, the flexibility and resilience of the business model and the outstanding dedication of the team," it said. "The group enters 2023 with optimism."
Shares in telecoms testing company Spirent Communications (LON:SPT) slumped on Friday as the company said it expected earnings to be weighted towards the second half as customers delayed investment decisions.
Full year revenue grew by 5.5% to $607m as the company said it had coped with global economic challenges, supply chain constraints and increasing cost inflation.
“As previously communicated, global market economic conditions have been impacting some of our customers, resulting in delays to their investment decisions,” Spirent said in a trading update.
“Whilst we expect customers to remain committed to their development projects overall, evidenced by no cancellations, the group's performance is now likely to have a heavier than usual weighting to the second half of 2023.”
Spirent said it continued to win important strategic deals and built its orderbook by 7% last year. It expects to deliver an adjusted operating profit slightly ahead of market consensus.
Its high-speed ethernet operation grew strongly driven by new product releases including new application security products, which offset some customer timing impacts in Lifecycle Service Assurance, it added.
Close Brothers also tanked after the merchant bank said it will be setting aside a further £90m against bad loans from Novitas and that the performance of Winterflood Securities continues to be hit by the slowdown in trading activity in higher-margin sectors.
FTSE 250 - Risers
ASOS (LON:ASOS) (ASC) 764.50p 9.21%
Darktrace (LON:DARK) 245.50p 4.33%
Aston Martin Lagonda Global Holdings (AML) 169.40p 4.02%
Dunelm Group (LON:DNLM) 1,078.00p 3.45%
Baltic Classifieds Group (BCG) 142.60p 3.33%
TBC Bank Group (TBCG) 2,280.00p 3.17%
Wetherspoon (J.D.) (JDW) 475.60p 3.17%
4Imprint Group (FOUR) 4,615.00p 3.13%
International Distributions Services (IDS) 220.60p 3.08%
Energean (ENOG) 1,277.00p 2.82%
FTSE 250 - Fallers
Spirent Communications (SPT) 227.80p -17.88%
Close Brothers Group (CBG) 918.00p -12.40%
Dr. Martens (DOCS) 135.60p -6.42%
Network International Holdings (NETW) 273.40p -3.60%
Dechra Pharmaceuticals (LON:DPH) 2,728.00p -2.22%
Direct Line Insurance Group (DLG) 171.15p -2.00%
Hochschild Mining (LON:HOCM) (HOC) 79.40p -1.67%
Ascential (ASCL) 198.70p -1.44%
Future (FUTR (LON:FUTR)) 1,462.00p -1.28%
Great Portland Estates (GPE) 541.50p -1.28%