Is it too early for Zalando shares?

Yes, that one Zalando-Stock (WKN: ZAL111) is falling and falling. Anyone who joined last year may regret it. In any case, you could have the share certificates cheaper in the meantime. To be more precise: even much cheaper, within a year the securities have lost three quarters of their market value.

This may lead some to think: man, I find Zalando stock attractive. E-commerce in the fashion sector and the strong competitive position are essentially things that I would like to focus on. But isn’t it too early now?

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Of course it could be, no one knows for sure. But today I would like to outline the initial situation that should certainly interest you when answering this question.

Zalando part: Too soon…?!

In any case, it may be operationally premature for some investors. In any case, if we look at the current situation, the e-commerce player is going through a problem: consumer interest in buying is generally ebbing. Consumer sentiment swings due to inflation. Translated, this means that there is less growth.

Right now, by the way. At best, the forecast for the current financial year for Zalando stock is that there should be operational stagnation. Even a drop in sales with a significant drop in earnings is possible. This gives us a very strong indication that now is not the growth mode for the e-commerce player. A problem that may well continue for a few more years.

But is it still too early for Zalando stock? Make up your own mind, but at the end of the day, the fundamental valuation is already very, very cheap. With a share price of EUR 5.7 billion and annual sales of around EUR 10.4 billion, the price-to-sales ratio is 0.55. For the stagnation, this is priced cheap enough for my taste. However, not for future growth potential, here a price-to-sales ratio of over 1 would be more realistic for me.

According to the medium-term forecast, the management of the Zalando stock expects a gross merchandise volume of 30 billion euros in 2025. According to the current forecasts, growth should therefore be possible. So now, with the price-to-sales ratio below 1, it may be too cheap a valuation for that perspective.

Acting a bit opportunistically…?!

I will not give you direction. However, the current situation for me is that Zalando stock is priced after stagnation and uncertainty, but at the same time further growth is not impossible. The e-commerce market and the market-leading position are two characteristics that can speak in its favor in the medium to long term.

Yet buying now would mean trading opportunistically. However, it can be a smart long-term decision if you have faith in the future of the e-commerce player. That’s the real question with cheap valuation, current numbers and outlook.

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Vincent owns shares in Zalando. The Motley Fool owns shares in and recommends Zalando.

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