On Thursday, Bernstein SocGen Group updated its assessment of Zalando SE (ETR:ZALG) (ZAL:GR) (OTC: ZLNDY), a European e-commerce company specializing in fashion with a market capitalization of $9.75 billion. The firm increased its price target on the company’s shares to EUR21.00, up from the previous EUR19.00, while keeping an Underperform rating on the stock. According to InvestingPro analysis, the company maintains a GOOD financial health score of 2.68, suggesting solid fundamentals despite the cautious analyst stance.
The price adjustment follows a significant surge in Zalando’s share price, which has risen 81.3% over the past year and 38.29% in the last six months, according to InvestingPro data. Despite this increase, Bernstein analysts, led by William Woods, noted that market expectations have remained relatively unchanged, with a slight downward trend, while the price-to-earnings multiple has expanded significantly to 48.05x, making it one of the more expensive stocks in its peer group.
Analysts at Bernstein highlighted that Zalando’s valuation appears steep compared to its global apparel peers, considering it operates in a mature market characterized by low growth and low margins. The firm expressed skepticism about Zalando’s mid-term Gross Merchandise Volume (GMV) guidance, which is set at 5-10% growth, while the consensus currently models a +7% GMV compound annual growth rate (CAGR) for the fiscal years 2024 to 2027. Real-time financial metrics and additional valuation insights are available through InvestingPro, which offers over 10 key investment tips for Zalando.
Zalando is expected to report its full-year 2024 results on March 6, 2025. Bernstein anticipates that the growth outlook might fall short of expectations, potentially at the lower end of the consensus forecast of +6.6%. The company’s current EBITDA stands at $606 million, while the firm predicts that the Adjusted Earnings Before Interest and Taxes (AEBIT) will align with current expectations of approximately €560-570 million.
The report concluded with a cautionary outlook, suggesting that Zalando could face multi-year earnings downgrades and a de-rating. Bernstein analysts also pointed out that even based on their fiscal year 2028 estimates, Zalando’s stock is trading at more than 20 times PE. They expressed a preference for Inditex (BME:ITX) as an alternative investment for quality growth within the apparel sector.
In other recent news, UBS has upgraded Zalando SE from Neutral to Buy, setting a new price target of EUR40.00, up from the previous EUR28.00. This upgrade follows Zalando’s reported revenue outperformance and Gross Merchandise Volume (GMV) upgrades, which suggest a potential positive cycle for the company. Zalando’s pre-release of fourth-quarter results showed a strong trajectory in profitability, with adjusted EBIT for the fiscal year 2024 expected to exceed the upper end of the company’s guidance. UBS anticipates further EBIT upgrades into fiscal year 2025, driven by factors such as a GMV compound annual growth rate of 6.6% to 2028 and improved retail gross margins. The analyst also mentioned the potential for mergers and acquisitions involving the YOU platform, which could be beneficial, though this is not included in the current base case. Despite strong performance over the past year, UBS’s analysis indicates there is room for further growth, given Zalando’s improving cash flow return on investment. These developments highlight a positive outlook for Zalando’s continued growth and profitability.
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