Yahoo Finance Fashion Retailer Zalando Expects 2021 Revenue Above Estimates; Target Price €119 in Best-Case
German e-commerce company Zalando SE said on Monday that its revenue forecast for the financial year 2021 is significantly above current market expectations due to an extraordinarily strong start to the year.
German online fashion retailer forecasts to grow GMV by 27-32% to EUR 13.6-14.1 billion in the current financial year. Revenue is projected to grow by 24-29% to EUR 9.9-10.3 billion, trailing GMV growth as a result of the ongoing platform transition and increasing partner share.
Moreover, Zalando expects to continue to grow profitably with an adjusted EBIT of EUR 350-425 million and said will continue to invest into its logistics infrastructure and technology platform and plans capital expenditure of EUR 350-400 million in 2021.
This comes ahead of the full 2020 results scheduled for 6 AM CET today. The company will host an investor call at 10 AM CET and host a Capital Markets Day event starting at 11 am CET.
Zalando shares, which surged over 101% in 2020, closed 1.1% higher at €86.34 on Monday. The stock rose by over 7% in the last week.
Analyst Comments
“Zalando has this evening released an unscheduled short statement ahead of publishing its full 2020 results. It suggests that the 2020 results are going to be very much as the market was expecting, but that 2021 consensus forecasts should increase materially,” noted Geoff Ruddell, equity analyst at Morgan Stanley.
“It was always likely that the year had started very well, given that most German apparel stores have been closed in recent months. Nevertheless, we think investors will be surprised at how strongly Zalando has been able to grow in Q1 – not least because of the operational difficulties involved in growing so rapidly. So, we expect the statement to be taken well. We note though that the company is also holding a Capital Markets Day, so there may be further news flow coming that could also drive the shares over the next few days.”
Zalando Stock Price Forecast
Seventeen analysts who offered stock ratings for Zalando in the last three months forecast the average price in 12 months of €101.36 with a high forecast of €119.00 and a low forecast of €80.70.
The average price target represents a 17.04% increase from the last price of €86.60. Of those 17 analysts, nine rated “Buy”, six rated “Hold” and two rated “Sell”, according to Tipranks.
Morgan Stanley set a base target price of €82, €130 under a bull-case scenario, €25 in a worst-case scenario, and gave the company an “Equal-weight” rating.
Several other analysts have also updated their stock outlook. Zalando received a €111.00 price target from analysts at The Goldman Sachs Group. The brokerage presently has a “buy” rating on the stock. Hauck & Aufhaeuser set an €85.00 target price and gave the company a “neutral” rating. Deutsche Bank set a €112.00 target price and gave the stock a “buy” rating. Baader Bank set a €115.00 target price and gave the company a “buy” rating.
“Zalando’s plan to become ‘the starting point for fashion’ is exciting and, if achievable, could leave the shares looking very cheap in due course. But we see lots of reasons to believe it could prove over-ambitious. Whilst Zalando has so far been growing strongly during the COVID-19 pandemic, we think it likely that online penetration in apparel will fall back to more ‘normal’ levels once a vaccine has become widely available,” Morgan Stanley’s Ruddell added.
“Valuation aside, we prefer the Zalando business model to that of ASOS and think it will prove more sustainable than that of Boohoo.”
Upside and Downside Risks
Risks to Upside: Extend lockdowns could drive even more of the apparel market online in 2021. Zalando delivering on its ‘starting point of fashion’ strategy. A technology solution for ‘fit’ emerges, causing a permanent reduction in returns rates -highlighted by Morgan Stanley.
Risks to Downside: The channel shift in apparel that COVID-19 appears to be causing could prove short-lived. Returns rates could start to increase again, putting pressure on margins.
Check out FX Empire’s earnings calendar
This article was originally posted on FX Empire
