Zalando share price has popped: is it a good buy now?

By:
on Mar 18, 2024
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  • Zalando stock price has bounced back in the past few days.
  • The shares are hovering at their highest level since December last year.
  • Zalando has changed its strategy as it focuses on growth and profitability.

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Zalando (ETR: ZAL) share price has staged a strong rebound in the past few weeks as some investors buy the dip of the DAX index constituent. The stock surged to €22.50 on Friday, much higher than the year-to-date low of €15.880. Despite this comeback, it remains about 80% below its highest level in July 2021.

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Zalando strategy shift

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Zalando stock price has been in a strong downtrend in the past few months as concerns about its growth continued.

The stock has crashed hard even as the company’s revenue growth has remained over the years. Its revenue came in at over €3.2 billion in 2015 to over €9.1 billion in 2020. Its revenue in 2022 stood at over €10.9 billion followed by €10.1 billion in 2023.

Zalando’s profits have remained under pressure in the past few years. Its profit came in at €16.8 million in 2022, down from €226.1 million in 2020.

The company’s business has been growing. The most recent results showed that the number of customers in the ecosystem dropped from 51.2 million in Q4’22 to 49.6 million in Q4’23. Additionally, the number of average orders per active customer fell to 4.9.

Therefore, Zalando share price has bounced back sharply in the past few days after the company changed its strategy as it seeks to become a pan-European brand. This change is expected to lead to between 5% and 10% CAGR in GMV and revenue in the next five years.

Zalando aims to become a major player in the business-to-consumer (B2C) and business-to-business (B2B) industries. It also aims to go back to growth that it had a few years ago, helped by its strong balance sheet. It ended the fourth quarter with over €2.5 billion in cash.

The management expects that its GMV growth will be between 0% and 5% this year with revenue being in the same range. The adjusted EBIT is expected to be between €380 million and €450 million.

Zalando share price forecast

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Zalando share price

ZAL chart by TradingView

In my last article on Zalando in September, I warned that the stock would plunge to €20, which happened.

The daily chart shows that the Zalando stock price bottomed at €15.88 in January and then bounced back to €22. It has jumped above the important resistance point at €20.40, its highest swing in February.

The stock has formed an up-gap and moved above the 50-day and 25-day Exponential Moving Averages (EMA). Further, the Relative Strength Index (RSI) has moved slightly below the overbought point.

Therefore, the outlook for the stock is still mildly bullish, with the next point to watch being at €24.60, its highest point on November 15th. The stop-loss for this trade will be at €20.40.

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