Investec upgrades Asos to 'buy', hikes price target

(Sharecast News) - Investec upgraded Asos on Wednesday to 'buy' from 'hold' and hiked the price target to 560p from 500p, as it said the online fashion retailer is now "a more investable story". Investec noted that management has repaired the business economics and balance sheet.

"EBITDA is back in growth," it said. "Management's original medium-term profitability targets were largely delivered in FY26. The gross margin was above its 50% target and the EBITDA margin reached 7.6% versus its medium-term target of circa 8%."

Investec pointed out that the fourth quarter of 2026 marked a return to group gross merchandise value (GMV) growth for the first time since 2022. GMV trends improved sequentially throughout FY26, with the turnaround broadening out, it said.

In the second half, UK GMV was up 2% and Germany saw an 8% increase year-on-year, while USA GMV turned positive in Q4.

Investec said management guided to FY27 adjusted EBITDA of £180m to £200m versus consensus of £177m, or a range of £162m to £200m. "We still forecast a loss at the profit before tax level in FY27E, moving into profit in FY28E," Investec said.

It said the price target increase reflects more positive free cashflow expectations going forward due to top-line and EBITDA progression.

"Management is looking to refinance again in FY27 now that leverage is down at 0.6x. This would support further upside to DCF valuation," it said. "We expect proof points to build through FY27, helping confidence in the sustainability of growth, margin and free cash flow over the longer term.

"This will be helped by a CMD planned later in FY27 to give insight into the next chapter of Asos's growth strategy and update its medium-term financial framework."

At 1330 GMT, Asos shares were up 4.5% at 455.63p.