RBC Capital Markets has upgraded boohoo Group, the online fashion retailer that owns Debenhams, from 'underperform' to 'outperform', saying the shares have become more investable after a period of restructuring.
The broker raised its target price to 33p from 25p, almost 30% above the current share price of 25.5p.
It said the shares could nearly double to 50p if the company hits its goal of more than £100 million in annual pre-tax profit over the medium term.
Analysts Richard Chamberlain and Manjari Dhar said a stronger balance sheet had removed a key reason not to own the stock.
The company recently sold its Sheffield distribution centre and handed the lease to Primark, the budget clothing chain.
It has received £76.5 million so far, with a further £13.5 million due early next year.
The group now expects to have negligible net debt by the end of its financial year in February.
RBC said management could now focus on trading rather than restructuring.
The broker said investors underestimated the strength of the Debenhams online marketplace, which sells products from more than 25,000 partner brands.
Gross merchandise value, the total value of goods sold on the platform, rose 14% in the first half, while gross profit grew 25%.
Debenhams has more than 19 million customers, and 60% of them return to buy again.
RBC also noted that most of the group's younger brands, including boohoo and PrettyLittleThing, have returned to growth, as has Karen Millen.
The broker expects lease costs to fall to £4 million next year from £14 million, and interest costs to drop by at least £10 million.
It forecasts free cash flow, the cash left after costs and investment, of just under £40 million this year, rising to more than £60 million by 2030.
Frasers Group, the retail empire controlled by Mike Ashley, is the largest shareholder with a stake of about 27%.
