Boohoo's valuation is no longer "standout cheap" and the brand is slowing, Barclays said as it cut its stance on the stock to 'equalweight' from 'overweight'.
The bank, which lifted its price target to 240p from 225p, said it remains constructive on Boohoo, but with the shares
back to a smaller discount to ASOS and Zalando on 33x 2019 EV/EBIT, the valuation is no longer very cheap, albeit still reasonable.
In addition, it argued that the Boohoo brand is notably slowing, which matters as a lead indicator of maturity and hence the multiple.
Barclays said that until it gets more confidence in Boohoo reaccelerating at the same margin, it is hard to have confidence that other brands, namely PrettyLittleThing, won't reach similar levels of maturity and then slow, without much more investment in the business.
It expects this to be a debate among investors until the next set of results that could hold back performance.
"From here we lack confidence on earnings momentum in either direction in the near term. Boohoo should accelerate as comps ease through the year, but risks are growing and growth is getting harder. PrettyLittleThing is also migrating warehouse imminently, bringing execution risk. So we see less explosive upside here near term.
"Nasty Gal is still small. With less confidence on near term upgrades to new higher forecasts, we downgrade to EW," Barclays said, adding that it would put new money into ASOS and Zalando.
On Tuesday, the fast fashion retailer posted a 53% jump in first-quarter revenue, with strong performances across all geographies and brands as it continues to gain market share.
In the three months to the end of May, total group revenue rose to £183.6m from £120.1m the year before. Revenue in the UK increased 49% to £110.7m, while US revenues were 75% higher at £31.4m, Rest of Europe was 82% higher at £22.3m and Rest of World sales rose 24% to £19.2m.
Revenues at Boohoo were 12% higher at £97.2m, but PrettyLittleThing and Nasty Gal were the standout performers, with revenues there up 158% and 149% to £79.2m and £7.2m, respectively.
At 0930 BST, the shares were down 2.3% to 213p.