Farfetch Limited (FTCH) shares rose about 20% during Thursday's session after the company updated guidance at an investor conference. The company anticipates digital platform gross merchandise volume of $605 million to $630 million during the second quarter, which represents 25% to 30% growth, with continued 30% contribution margins. The online retailer believes that it plays a vital role in connecting the global luxury fashion community, particularly as the online share of luxury is expected to continue to grow following COVID-19.
Analysts remain mostly bullish on Farfetch stock. Deutsche Bank reiterated its Buy rating and raised its price target from $15 to $17 in mid-May after Farfetch released first quarter financial results, saying that the company could come out of the crisis stronger. Credit Suisse similarly raised its price target from $15 to $18, adding that the $300 billion addressable market remains fragmented and under penetrated with little competition.
The company's highly distributed and resilient business model that spans 190 countries could help buffer a drop in spending across North America and European end markets.
From a technical standpoint, Farfetch stock broke out from an ascending triangle to fresh highs. The relative strength index (RSI) moved toward overbought levels of 63.81, but the moving average convergence divergence (MACD) remains neutral. These indicators suggest that the stock could see some consolidation above the breakout point before moving higher.
Traders should watch for consolidation above trendline support at $16.42. If the stock moves higher, traders could see a move toward R2 resistance at $18.39 or fresh highs. If the stock moves lower, traders could see a move toward the pivot point and 50-day moving average at around $14.20, although that scenario seems less likely given the bullish fundamentals.
The author holds no position in the stock(s) mentioned except through passively managed index funds.