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Asos share price path of the least resistance revealed

Asos (LON: ASC) share price dropped sharply on Wednesday after the company’s Chief Operating Officer (COO) and Chief Financial Officer (CFO) left. The stock dropped to a low of 888p, which was the lowest level since July 6. It has dropped by more than 25% below the highest level in July.

Why is Asos crashing?

Asos is a leading British fast fashion company valued at over 885 million pounds. The company sources and then sells its products through its website and mobile applications. 

Like Boohoo, Asos has gone through a rough patch in the past few months as demand for its products slow. It has also seen a significant surge in competition from the likes of Shein and a higher cost of doing business. The firm has had to boost wages and pay more for its logistics. 

In June, Asos announced that its revenue growth in three months to May 31st was minuscule. Its total revenue rose by 4% to 983 million pounds. This growth was helped by the strong performance in the US and UK and offset by the European Union and Rest of the World.

As a result, the company reduced its forward guidance for the year. It expects that its revenue growth will be between 4% and 7%. It also revised its adjusted PBT to be between 20 million and 60 million pounds. The management attributed this performance to higher returns on warehousing and delivery costs and higher labour costs.

The Asos share price dipped sharply on Wednesday after the company announced that Mat Dunn will depart this year. Dunn serves as the company’s COO and CFO, which makes this decision a major one. The decision comes less than a year after Nick Beighton was replaced as the CEO by Salsa Jeans.

The stock declined because investors believe that the departure is a sign that the company is not doing well. Therefore, the shares will likely underperform ahead of the final annual results that are scheduled for October.

Asos share price forecast

The weekly chart shows that the Asos stock price has been in a strong downward trend in the past few months. The shares are trading at 879p, which was lower than its all-time high of 8,022p. It managed to move below the important support level at 981p, which was the lowest level on March 16. 

The shares remain below the 50-week and 25-week moving averages while the Money Flow Index (MFI) dropped below 50. The path of the least resistance for Asos share price is lower as sellers target the support at 776p.

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