Boohoo share price has remained in a tight range in the past few years. It has remained inside a narrow range of between the support at 26.26p and the resistance at 59.70p. It has crashed by over 93% from its highest level during the pandemic. So, will the Boohoo stock price rebound this year?
Why the Boohoo share price has crashed
Boohoo, the popular fast fashion brand in the UK, has come under pressure in the past few years. Its stock has collapsed, erasing billions of dollars in value, while its losses have mounted over time.
Boohoo has faced major challenges, with the most notable one being the rising competition from the likes of Shein and Temu.
There are also signs that UK consumers are not shopping on Boohoo as they did in the past. A good example of this is the fact that other popular fast fashion brands like Zara and H&M have continued doing well despite this competition.
Another concern is that there are concerns about the substantial customer returns. Its six-month GMV pre-returns was £1.17 billion and £808 million post-returns.
The most recent half-year results showed that Boohoo’s business remained under pressure in the first half of the financial year. Its General Merchandise Volume (GMV) dropped by 6%, while its revenue dropped by 15%.
More data showed that Boohoo’s margins have continued to narrow for a while. The gross margin moved to 50.7% from the previous 53.4% even as the company slashed its operating costs.
Read more: As the Boohoo share price stalls, is it a good contrarian buy?
Boohoo share price has also crashed because of its US business, which the management hoped would play a pivotal role. The company has now decided to scale back its US ambitions by closing its distribution centers. It hopes that closing those operations will help it grow its profitability.
Exiting the US distribution center was a big deal as the company was forced to have a big write off of about £108.7 million.
Boohoo’s guidance was that its GMV would be higher for the full year. It expects its youth brands to continue their substantial headwinds. Most importantly, the company hopes that its actions, including cost cuts, will help it become a more profitable company.
Read more: Boohoo share price is still lagging: time to buy or stay away?
Is it safe to buy the BOO stock dip?
Boohoo is a well-known brand, but is going through major challenges that are hard to deal with. The most important issue is that there are signs that it is seeing weaker demand from UK customers.
A good example of this is that the number of visitors to the website has continued slowing in the past few months. SimilarWeb data shows that the number of website traffic crashed by almost 20% in February to 29 million.
Its UK traffic dropped by 17%, while the US traffic plunged by 25%. Traffic in other key countries like France, Netherlands, and Australia.
Boohoo share price forecast
The weekly chart shows that the BOO stock price has remained in a tight range since 2022. It has remained between the key support at 26.26p and the resistance at 59.70p. All previous attempts to rebound have faced substantial resistance.
On the positive side, this consolidation could be a sign that it is in the accumulation phase of the Wyckoff Theory. One of the investors who has accumulated the stock in this phase is Mike Ashley, the founder of Frasers. This phase is usually followed by the markup, which is characterized by higher demand.
Therefore, there is a likelihood that the stock will surge, and possibly retest the resistance at 59.70p. The challenge is that this breakout may take a longer time to happen. A break below the support at 26.26p will invalidate the bullish view.
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