Boohoo share price gets oversold ahead of preliminary earnings

Boohoo (LON: BOO) share price is in a freefall as concerns about the company continued. The stock plunged below the support level at 40p after the relatively weak earnings by Asos, its top competitor. It has retreated from the year-to-date high of 60.86p or by ~38%. Focus now shifts to the upcoming financial results.

Boohoo earnings preview

One of the biggest UK retail news this week will be Boohoo’s preliminary results scheduled for Tuesday this week. As I wrote here, these are important results because they will provide more information about the company’s growth and profitability.

Boohoo, like Asos, is now focusing its efforts on profitability by reducing costs and selling profitable products. Still, analysts are concerned about this strategy as the industry gets more competitive, especially from Shein and other Chinese companies. For example, those at Deutsche Bank lowered their stock target from 50p to 45p.

The other important catalyst for the stock will be its loss guidance. The most recent results showed that the company’s loss jumped to 15 million pounds in the first half of its financial year. There are chances that its preliminary results will show more losses going forward. Some analysts believe that the company will turn a profit in 2023.

The current price action of Boohoo share price reflects that most investors have low expectations for the company. It is a sign that the expected negative results have been priced in. Therefore, it will not be a surprise if the shares bounce back after the earnings.

Boohoo share price forecast

LON: BOO stock has been in a strong bearish trend in the past few days. It has managed to move below the 50-day exponential moving average on the 4h chart, At the same time, the stock is slightly above the important resistance point at 32p, the lowest point in 2022.

Oscillators like the Relative Strength Index (RSI) and the Stochastic Oscillator have moved below the oversold level. Therefore, the shares will likely have a temporary reprieve after its earnings since the bad news has already been priced in. After this, the shares will resume the downward trend as sellers target the key support level at 32p.