Barclays Upgrades ASOS to Equal Weight, Doubles Price Target on Improved Debt Outlook

Barclays has upgraded online fashion retailer ASOS plc to "Equal Weight" from "Underweight," citing a much-improved financial outlook driven by asset sales and the prospect of debt refinancing. In a research report published Monday, the bank also doubled its 12-month price target on the company's stock to 420p from 210p.

Improved Risk Profile

The upgrade reflects a view that operational adjustments and balance sheet deleveraging have significantly reduced the downside risk for the stock. Barclays' new price target of 420p aligns closely with ASOS's recent trading price of 418p.

Analysts at the bank noted that while top-line growth remains pressured by fierce competition from ultra-fast fashion giant Shein and resale platforms, the company's financial footing is becoming more secure.

Balance Sheet in Focus

A key factor in the revised rating is the material improvement in ASOS’s debt profile. The company recently generated £115 million in net cash from the sale of warehouses in Lichfield, UK, and Atlanta, U.S., which has been used to pay down debt.

Barclays' report included several key financial projections:

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• Net debt (excluding leases) is forecast to fall to -£63 million by the end of fiscal year 2026, a sharp reduction from -£320 million in FY24.
• A comprehensive debt refinancing is expected in early 2027, which could replace expensive convertible bonds with a more standard term loan on better terms.
• Interest expense is projected to drop from £75 million in FY25 to £36 million in FY28, boosting cash flow.

Barclays stated that it forecasts "clear positive equity free cash flow in FY28 and an EFCF yield of 11%, providing a much-needed valuation anchor."

Stabilizing Sales and Market Context

Top-line performance is also showing signs of bottoming out, according to the bank's analysis. Group Gross Merchandise Value (GMV) declines are expected to narrow to -5.5% in FY26 before returning to low-single-digit growth of 2.7% in FY27.

In a peer comparison, Barclays maintained its "Overweight" rating on German online fashion retailer Zalando SE, citing its cleaner balance sheet and more established cash generation.