On Friday, Goldman Sachs (NYSE:GS) updated its stance on Zalando SE (ETR:ZALG) (ZAL:GR) (OTC: ZLNDY) stock, increasing the price target to EUR42.50 from the previous EUR37.00 while maintaining a Buy rating.
The adjustment follows Zalando's pre-announcement of its FY24 results, which revealed an adjusted EBIT (earnings before interest and taxes) anticipated to reach approximately €510 million. This figure surpasses the company's own guidance, which was set between €440 and €480 million.
The performance exceeding expectations was attributed to robust customer growth, propelled by effective marketing strategies and improved product sell-through rates. Zalando reported that its Gross Merchandise Volume (GMV) rose by +4.5% to €15.3 billion, and revenues saw an increase of +3.9% to €10.5 billion.
Focusing on the fourth quarter in isolation, Goldman Sachs estimated that Zalando's GMV grew by +5.2%, revenue by +6.9%, and adjusted EBIT reached €217 million, which implies a margin of 6.7%.
In light of these strong results, Goldman Sachs has revised its estimates upward. The firm's analysts expressed confidence in Zalando's outlook by reiterating the Buy rating and setting a new price target. This updated target suggests a potential upside of approximately 35% from the current levels.
Zalando's financial performance, particularly in the fourth quarter, reflects the company's ability to navigate the market effectively. The reported growth in GMV and revenue, coupled with a solid adjusted EBIT margin, underscores the company's operational strength. Goldman Sachs' revised price target and maintained Buy rating are direct responses to these positive indicators as seen in the pre-announced financial results for FY24.
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