We Boohoo (LSE: BOO) shareholders haven’t had a great 2021 so far, with our shares down 9% since the start of the year. But we’ve just seen a bit of an uptick in the past couple of days, so where is the share price likely to go in June?
Based purely on my opinion that Boohoo shares are undervalued, I reckon it should go up. But I do see some factors that appear to be holding it back. For one thing, the attraction of online sellers that propelled so many of them upwards in 2020 is subsiding. When high street stores are all closed, that’s good news for online retail, for sure. But that’s over now.
And I think the early pandemic climb in 2020 was overdone. Well, overdone for the short term if it was based solely on the store closures effect, that is. With a long-term view to the company’s potential growth, I reckon the Boohoo share price was still good value, even at its high point last year.
Boohoo share price volatility
But the past year or so does highlight for me a couple of the risks of buying Boohoo shares. One is that, as with just about any growth share, there’s a lot of sentiment behind the price. And that sentiment can often turn sour. I think Boohoo should be one of June’s winners. But sentiment leads to volatility, and there’s every chance we could see a couple of bearish summer months.
The Boohoo share price is up 35% over the past two years, which is a great result. But it’s down nearly 30% since mid-June last year. So depending on when an investor might have bought, Boohoo could be anything from a big winner to a big loser right now. And that’s in the space of just two years.
The other big risk is it’s actually very hard to put a rational valuation on the stock. We’re now looking at a trailing P/E of over 40. There’s a lot of future growth already built into that valuation. I might simply have got my assessment wrong, and the shares might be overvalued. I don’t think so, but there’s uncertainty here.
Slowing growth?
There’s one other thing I reckon could be holding the Boohoo share price back from a bullish summer. It comes from the company’s last set of results. They were just fine, in my view. But the outlook for the current year will have disappointed some investors. Boohoo expects revenue growth of around 25%, which might sound good. But it does follow on from a year with 40% growth. And when revenue growth for a stock like this starts to slow, we often see a period of weakness.
So to sum up. I think Boohoo deserves to gain in June. But there are short-term factors I think could hold it back. Still, I say that’s a good thing for investors who are still in a net buying phase.
