Börse Express – Zalando share: My path until 2025!

to Zalando-The stock (WKN: ZAL111 ) corrected so much, I honestly don’t care. Of course, it is not the best case in my investment scenario that the shares lose about 80% of their market value. And at the same time insert a year of stagnation in sales.

However, I prefer to focus on the long-term growth story. With e-commerce, an intact ecosystem in Europe and a solid path to 2025, I see my requirements as fulfilled. Ultimately, we will have to wait and see if management can reach the ambitious goal of 30 billion euros in gross merchandise volume by the end of 2025. But at least there is a prospect for growth.

Still, volume growth in Zalando stock isn’t the only thing I want to see anymore. I am happy to outline my path for you how the e-commerce player will manage the re-evaluation until then. Or should create.

Zalando part: My way to 2025!

Formally speaking, the Zalando share has a favorable valuation. A price-to-sales ratio of around 0.6 is really cheap. However, growing net results is what I would like to see increase in the future. 2022 is likely to be a year of declining results. Last year, however, there were over 200 million euros with a net margin of just over 2%.

This is exactly what I want to see in the future: More volume that scales more. Ultimately, I think a net margin of between 3 and 5% is possible within this time corridor. This means that with a turnover of 10 billion euros, between 300 and 500 million euros should be possible. If the e-commerce group achieves a turnover of 20 billion euros in 2025, the value should be between 600 and 1,000 million euros. So much for the theory.

The Zalando share will then be valued at a price/earnings ratio of between 6 and 20. The 300 million euros should at least offer the prospect of increasing net margins and net results. After all, a price-to-earnings ratio of 20 would be only moderately better than today’s value. But that could be a realistic goal.

The question about price is of course: How is Zalando going to scale like this? I see different possibilities. Cost synergies through more growth. In particular, the increase in the average shopping basket per order (among other things due to no longer free shipping below EUR 24.90) and the premium model for an annual fee are two attractive alternatives. I see a net margin of 5% as very possible.

A long way between now and 2025

The Zalando share’s path to 2025 is paved with uncertainties and possible stumbling blocks. Ultimately, it’s a big question mark about how growth will continue in 2023. Inflation and less willingness to spend are the current brakes.

Nevertheless, the trend towards e-commerce continues. But not only the volume growth should mean the revaluation in the future. No, Zalando should inevitably also show more profitable growth. In any case, it is becoming more and more important for my thesis.

The article Zalando sharing: My way to 2025! first appeared on The Motley Fool Germany.

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

Motley Fool Germany 2022

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