On Monday, Citi issued an upgrade for Zalando SE (ZAL:GR) (OTC: ZLNDY) stock, shifting its stance from Neutral to Buy. The firm also increased the price target for the European e-commerce fashion giant to €32.00, up from the previous target of €20.50.
The upgrade comes with a positive outlook on the company's near-term performance, anticipating a return to positive Gross Merchandise Value (GMV) growth in the first quarter of 2024, which is expected to be announced on Thursday, May 7. This would mark the first instance of positive GMV growth since the first quarter of 2023.
Citi's analysis suggests that the anticipated growth could lead to a re-rating of Zalando's shares. The firm's projections are notably more optimistic than the consensus, with a 6% higher adjusted EBIT forecast for 2024 and a substantial 12% higher forecast for 2028. The analyst at Citi believes that the potential for further fulfillment cost efficiencies at Zalando has been underestimated by the market.
InvestingPro Insights
Following Citi's upgrade of Zalando SE (OTC: ZLNDY), investors may find additional context in the latest data and analysis from InvestingPro. With a market capitalization of $6.83 billion and a high P/E ratio of 76.19, Zalando's valuation reflects investor expectations for future growth. However, when adjusted for the last twelve months as of Q4 2023, the P/E ratio moderates to 60.58, which may be more in line with the company's near-term earnings growth, as indicated by a low PEG ratio of 0.18 for the same period. This suggests that Zalando's earnings growth could outpace its P/E ratio, potentially offering value to investors.
Zalando's stock has experienced significant volatility, with a notable 7.94% drop over the last week, yet it has delivered strong returns of 26.33% over the last month and 23.47% over the last three months. These movements may reflect market sentiment and reactions to underlying financial performance and forecasts. An InvestingPro Tip highlights that Zalando holds more cash than debt on its balance sheet, which is a positive sign of financial stability. Additionally, the company's liquid assets exceed short-term obligations, providing further evidence of a solid financial position.
For investors seeking a deeper dive into Zalando's financials and performance metrics, additional InvestingPro Tips are available at https://www.investing.com/pro/ZLNDY. To enhance your investment research with these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are 10 more InvestingPro Tips listed, offering comprehensive guidance for evaluating Zalando's investment potential.
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