UBS upgrades Zalando SE to ‘buy’ amid growth, market share, and profit gains
INvesting.com — UBS Global Research has upgraded Zalando SE (ETR:ZALG) to a “buy” from a “neutral” rating, citing signs of a potential turnaround driven by structural growth and operational improvements.
Shares of the German online retailer jumped to 12.9% at 08:41 ET (13:41 GMT).
The revision is supported by three key observations: market share gains, enhanced profitability, and growth in Zalando’s business-to-consumer and business-to-business segments.
Analysts at UBS highlighted Zalando’s strong gross merchandise value performance, which has exceeded expectations following two challenging years.
They project Zalando’s GMV to grow at a compound annual growth rate of 8.1% between 2025 and 2028, compared to a consensus estimate of 6.6%.
This forecast reflects the company’s dominant position in the European online fashion market, which benefits from a broader e-commerce resurgence.
The upgrade also underscores opportunities for higher earnings before interest and taxes, as UBS forecasts EBIT margins to improve to 4.6% in 2025 and further in subsequent years.
This growth is attributed to better retail margins, particularly from first-party operations, and improvements in fulfillment cost efficiencies.
Analysts pointed to Zalando’s disciplined inventory management and its ability to leverage scale in fulfillment operations, particularly through new warehouse automation initiatives.
Additionally, UBS sees Zalando’s potential acquisition of About You as a value-adding move. The integration could enhance Zalando’s B2B offerings through complementary logistics and software services, while also improving buying margins and operational efficiencies on the B2C side.
UBS estimates that this acquisition could generate long-term synergies exceeding €200 million, significantly above the company’s conservative estimate of €100 million.
Despite a strong run in Zalando’s share price over the past year, UBS believes the stock remains undervalued given its improved cash flow return on investment profile.
The price target has been raised to €40 from €28, reflecting the analysts’ confidence in the company’s ongoing upgrade cycle and sustained profitability growth.
The revised outlook emphasizes Zalando’s adaptability in a competitive market and flags its strong financial positioning, even with the anticipated challenges of integrating ‘About You.’
As the European online retail sector continues its recovery, Zalando’s strategy appears poised to capitalize on shifting consumer trends and operational efficiencies.