The AO World PLC (LON: AO) share price rallied 24.46% after issuing a trading update that increased its profit guidance for the year ending in March 2023. This is the second time the company is raising its profit guidance for the year after a similar update in January.
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The electronics retailer increased its profit target to between £37.5 million and £45 million for the whole year, marking an improvement to the guidance issued in January when the company upped its profit target to between £30 million and £40 million.
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Investors cheered the news, given the substantial £7.5 million increase in the lower band of the new profit target from £30 million to £37.5 million in just over a month. The company attributed the higher pretax profit guidance to improving margins and the benefits of initiatives to reduce its operating costs.
AO world further revealed that underlying demand from its customers remained strong, contributing to its higher gross profit margins. The company expects the trends to continue for the remaining five weeks of the current financial year.
The retailer noted that the latest profit upgrade comes after taking multiple steps to simplify its business and increase efficiency, which has paid off much quicker than expected. The firm also noted that Mobile RPI price increases were much higher than expected.
Investors await AO World’s full-year earnings results scheduled for release on 14 April 2023. Meanwhile, many wonder whether today’s rally will result in a sustained uptrend, and the answer is unclear.
Despite today’s rally being driven by a robust fundamental reason, I expect AO world shares to pull back slightly before continuing higher. I would wait for this pullback before buying the shares, with my main target being to benefit from the April earnings release.
*This is not investment advice.
The AO World share price.
The AO World share price rallied 24.46% to trade at 69.55p, from Monday’s closing price of 55.88p.
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