Sell Asos and buy Currys says City broker
Analysts have backed Currys as their most preferred consumer stock of the year whilst warning investors away from struggling online marketplace Asos.
Panmure Liberum analysts set a target price for Currys at 155p versus its current price of 94.25p.
The tech retailer had a strong run last year, with its stock up more than 90 per cent in the last twelve months.
The FTSE 250 firm enjoyed a return to sales growth in 2024, reaping “initial rewards of a significant amount of work done over the last few years”, Panmure analyst Wayne Brown said.
Notably, the firm has improved its gross margin and fixed operating costs over the last three years.
“We believe the shares still have more upside in 2025… Currys stands out in a consumer landscape constrained by low growth,” Brown said.
He added that the “potential for lower pension contributions, cash exceptionals and interest costs” and better margins in the previously-dire Nordic regions could attract new investors.
Asos: sales will continue to decline
Meanwhile, Asos was the “least preferred” consumer stock, with a “Hold” rating and a target price of 445p, up just 27p from its current price of 418p.
The e-commerce giant reported an operating loss of £331.9m for the year to 1 September 2024, up £83.4m from a loss of £248.5m in 2023.
“Multiple inventory write-offs, a refinancing, an equity raise, and sale of a key asset later, Asos is seeing few signs of sales declines relenting and still finds itself on an unsure path,” Panmure analyst Anubhav Malhotra said.
“Its competitive position worldwide has been eroded due to improved multi-brand online propositions from the likes of NEXT, M&S [and] JD Sports, competition from China, and pulling back on the consumer offering in international markets,” he added.
Asos sold 75 per cent of its stake in the British high street brands Topshop and Topman in September last year, using the sale proceeds to reorganise its significant debt profile.
Panmure isn’t the only broker to warn on Asos’ future: Analysts at JP Morgan and Shore Capital have both voiced concerns that it faces tough competition online and slower demand.
Malhotra suggested Asos could struggle to return to positive sales this year due to its overdependence on discounting and ongoing weak consumer demand, making it harder for the group to hit targets.
“It appears the identity of the Asos brand isn’t as pronounced and distinct as was previously perceived,” Malhotra said.