that ZalandoStocks (WKN: ZAL111) have already fallen sharply. With a share price of 25.71 euros, more than three quarters of the market value is now gone. Despite e-commerce, despite the mega-trend. Yes, even in spite of growth.
The market is currently not particularly positive about the future prospects. Especially because the consumer climate is currently cloudy. Even in e-commerce, but especially in the fashion sector, consumers are likely to increasingly step on the brakes. After all, some consumers give up other things than just new clothes.
Nevertheless, let’s look at the Zalando stock and the question of how low the stock could realistically fall. Deeper is possible for me, at least in the short term. But also sustainable?
Zalando part: How deep can it go fundamentally?
Zalando shares have already fallen very, very low in terms of valuation. With a share price of EUR 25.71, the market value has already fallen to EUR 6.7 billion. This means that the price-to-sales ratio has also fallen to 0.65. Very cheap, no doubt, if we assume that e-commerce is not dying.
A price-to-earnings ratio of 28.2 is also pretty cheap for me. Although the net profit may fall in the current year 2022, some costs are likely to be higher this year. But if we keep figuring out if we keep a value perspective and focus primarily on profits, a price-to-earnings ratio of 15 might be a logical place to start. Or a low point. In this case, it can go almost halfway down again.
A price-to-sale ratio of 0.35 would then be relatively cheap. In any case, for me it was actually too cheap for the future growth prospects. As I said: E-commerce is not dying, it is just taking a break from a period of economic weakness.
The market leader is also behind the Zalando stock, which justifies a little more premium rating for me. In addition, the management’s actual forecast is that by 2025 a gross volume of goods of more than 30 billion euros will be achieved. As a result, the valuation measure is likely to become even cheaper in the medium term.
A safety margin already today
For me, the Zalando stock already has a safety margin today. All it needs is intact, continuous growth. I see the possibility that the lack of profitability may cause the stock price to collapse even more. But: There is an excellent chance that there will be growth in the medium term if the consumer climate brightens up a bit again.
The deep fall leads to a big discount and already to an absolutely cheap starting position. Perhaps foolish investors should become more and more reluctant to think through further downside. No, but to realistically consider what is a more likely scenario in the medium term. I see growth … and a cheap valuation for it.
Our best stock for 2022
There’s a company whose name gets a lot of buzz from analysts at The Motley Fool these days. It’s for us THE BEST INVESTMENT FOR 2022.
You could also benefit from it. To do this, you must first know all about this unique business. So now we have one free special report prepared, which introduces this company in detail.
Vincent owns shares in Zalando. The Motley Fool owns shares in and recommends Zalando.