Investors looking for a stock to buy haven’t had much reason to take ASOS (LSE:ASC) seriously in recent years. The online fashion retailer’s sales have plunged since the pandemic, and it has been posting losses.
Consequently, the FTSE 250 stock has cratered 83% in five years!
Unfortunately, the company was rocked yesterday (6 October) when some customers received an alarming push alert in the ASOS mobile app. It said: “Dear ASOS DPO and IT, we have fully compromised the Snowflake instance. Engage with us, or we will leak it“. This was accompanied by a Telegram channel link.
Creepy stuff, no doubt, when shoppers were probably expecting something more like ‘25% off autumn knitwear’. The stock immediately dropped 13%, although it has since clawed back some gains to sit about 10% below yesterday’s opening price.
Is this a stock to consider buying after the dip?
The hack
Let’s start with the high-profile hack, which amounted to an extortion note that was also sent to the firm’s data protection officer and IT department. This is a potentially serious breach because the company confirmed that “basic personal information including name and contact details may have been accessed“.
However, ASOS said it doesn’t believe payment card information or account passwords were obtained. That will be a massive relief to shareholders, as that could have proved financially damaging.
Strangely, the hacking group said it had got in through Snowflake. However, the US data storage giant said there’s no evidence that it was compromised.
What to make of this? Well, it could have an impact on sales, as affected customers might be wary about using the platform at the moment. There could also be some financial redress in future, though ASOS does have cybersecurity insurance.
As things stand, my assessment here is that this shouldn’t be too damaging once the dust settles.
The business
Turning to the actual business then, things are improving. In the 12 months to 30 August, the gross merchandise value (GMV) growth rate improved every quarter throughout the year, culminating in low-single-digit growth in Q4.
Therefore, while full-year GMV declined 5%, that represented progress. The adjusted gross margin came in higher than the firm’s 50% medium-term target, as did adjusted EBITDA, which was above the midpoint guided range of £150m-£180m. So this bodes well for a return to profitability at some point.
Another positive is that ASOS ended the year with 16.4m customers, broadly the same as in March. Indeed, total Q4 customers actually grew from Q3, the first quarter of growth in more than four years. This is encouraging.
Finally, net debt of about £110m was down from £184.7m the year before, aided by the disposal of its Lichfield and Atlanta warehouses.
With genuine green shoots of recovery emerging, the stock is up 61% year to date, even after yesterday.
The stock
Is the stock worth considering then? Potentially, as a high-risk recovery play. ASOS is moving towards an asset-light, hybrid platform model, which tend to be far more profitable.
Meanwhile, the stock has a very low price-to-sales ratio of 0.24. So there could be value here.
That said, there’s still intense competition from the likes of Debenhams/boohoo and Shein. Rival apps are often one swipe away, after all.
Personally, I prefer many other FTSE 250 stocks.
What growth stock do we like better than Asos Plc right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential growth.
And the best bit is that you can see if for yourself, right now, absolutely free of charge!
No jargon. No hard sell. Just a clear look at a growth share idea we think is worth your time.
Ben McPoland has no position in any of the companies mentioned.
Investors looking for a stock to buy haven’t had much reason to take ASOS (LSE:ASC) seriously in recent years. The online fashion retailer’s sales have plunged since the pandemic, and it has been posting losses.
Consequently, the FTSE 250 stock has cratered 83% in five years!
Unfortunately, the company was rocked yesterday (6 October) when some customers received an alarming push alert in the ASOS mobile app. It said: “Dear ASOS DPO and IT, we have fully compromised the Snowflake instance. Engage with us, or we will leak it“. This was accompanied by a Telegram channel link.
Creepy stuff, no doubt, when shoppers were probably expecting something more like ‘25% off autumn knitwear’. The stock immediately dropped 13%, although it has since clawed back some gains to sit about 10% below yesterday’s opening price.
Is this a stock to consider buying after the dip?
The hack
Let’s start with the high-profile hack, which amounted to an extortion note that was also sent to the firm’s data protection officer and IT department. This is a potentially serious breach because the company confirmed that “basic personal information including name and contact details may have been accessed“.
However, ASOS said it doesn’t believe payment card information or account passwords were obtained. That will be a massive relief to shareholders, as that could have proved financially damaging.
Strangely, the hacking group said it had got in through Snowflake. However, the US data storage giant said there’s no evidence that it was compromised.
What to make of this? Well, it could have an impact on sales, as affected customers might be wary about using the platform at the moment. There could also be some financial redress in future, though ASOS does have cybersecurity insurance.
As things stand, my assessment here is that this shouldn’t be too damaging once the dust settles.
The business
Turning to the actual business then, things are improving. In the 12 months to 30 August, the gross merchandise value (GMV) growth rate improved every quarter throughout the year, culminating in low-single-digit growth in Q4.
Therefore, while full-year GMV declined 5%, that represented progress. The adjusted gross margin came in higher than the firm’s 50% medium-term target, as did adjusted EBITDA, which was above the midpoint guided range of £150m-£180m. So this bodes well for a return to profitability at some point.
Another positive is that ASOS ended the year with 16.4m customers, broadly the same as in March. Indeed, total Q4 customers actually grew from Q3, the first quarter of growth in more than four years. This is encouraging.
Finally, net debt of about £110m was down from £184.7m the year before, aided by the disposal of its Lichfield and Atlanta warehouses.
With genuine green shoots of recovery emerging, the stock is up 61% year to date, even after yesterday.
The stock
Is the stock worth considering then? Potentially, as a high-risk recovery play. ASOS is moving towards an asset-light, hybrid platform model, which tend to be far more profitable.
Meanwhile, the stock has a very low price-to-sales ratio of 0.24. So there could be value here.
That said, there’s still intense competition from the likes of Debenhams/boohoo and Shein. Rival apps are often one swipe away, after all.
Personally, I prefer many other FTSE 250 stocks.
What growth stock do we like better than Asos Plc right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential growth.
And the best bit is that you can see if for yourself, right now, absolutely free of charge!
No jargon. No hard sell. Just a clear look at a growth share idea we think is worth your time.
Ben McPoland has no position in any of the companies mentioned.
