The Boohoo share price has been under pressure as the FTSE 250 company continues to deal with negative press. The shares are trading at 328.5p, which is 5% above last week’s low of 310p.
What happened: Boohoo, the fast-growing fashion company, has come under criticism since last year when a newspaper outlined worker abuse at a Leicester plant.
The company weathered the storm well and even reported strong results. The company’s latest results showed that the firm’s total revenue for six months to August 6 rose to 816 million pounds. This was a 45% increase from the same period in 2019.
Its profit rose from 45 million to 68.1 million pounds. It is also implementing measures from an independent review about how to improve the working conditions.
Boohoo made headlines last week when the US opened its investigation into the company’s business in Leicester. The Customs and Border Protection (CBP) is investing these claims after Liberty Shared outlined problems with the company’s factories. If foud guilty, the company’s goods could be seized at ports.
Obviously, these negative headlines are not positive for the Boohoo share price. Still, analysts at Berenberg believes that the stock could rise to 460p, which is 27% above the current level. They said:
“We believe the company is making progress in implementing the near-term recommended improvements that can reduce the risk of pervasive issues in the future, but we also believe more can – and should – be done,”
On the four-hour chart, we see that the BOO share price found a substantial resistance at 376.5p, where it formed a double-top pattern. A double-top is usually a bearish sign. The stock then dropped to 310p last week and is currently consolidating in this range. It is also slightly below the 25-period and 15-period exponential moving averages.
Therefore, in my view, while the overall trend is bullish, there is a possibility of more weakness in the near term because of the negative headlines. However, a move above 360p will invalidate this prediction.
