Zalando stock rating reiterated at Buy by Goldman Sachs

Goldman Sachs has reiterated a Buy rating on Zalando (ZAL:GR) with a price target of EUR43.00, implying approximately 60% upside, following discussions with the co-CEO. The firm highlights the strategic fit of About You's B2B SaaS product Scayle and differentiated B2C approaches, alongside Zalando's confidence in European online retail growth and positive loyalty scheme results. Management reaffirmed its 2028 EBIT margin target of 6-8% for the combined entity, driven by gross margin improvement and increased fulfillment utilization from the current 60%.

Analysis

Goldman Sachs has reiterated its Buy rating on Zalando (ZAL:GR) with a EUR 43.00 price target, signaling approximately 60% potential upside from current levels. This reaffirmation follows a meeting with company leadership, which highlighted the strategic rationale behind the integration with About You. In the B2B segment, About You's SaaS product, Scayle, is positioned to address gaps in brands' e-commerce capabilities, with cross-selling opportunities already being actively explored. In B2C, the two entities maintain distinct market positions, with Zalando pursuing a brand-led strategy while About You focuses on a social influencer-driven model, suggesting a complementary rather than cannibalistic relationship. Management expressed confidence in the long-term structural trend of online retail penetration in Europe, though they acknowledged this growth is more moderate than pre-Covid highs. Critically, Zalando reiterated its 2028 EBIT margin target of 6-8% for the combined group, identifying gross margin improvement and increasing fulfillment utilization from its current 60% level as the primary levers to achieve this long-term profitability goal.

Key Decisions for Investors

• Given the reiterated Buy rating from Goldman Sachs and a substantial 60% implied upside, investors with a bullish outlook on European e-commerce may consider this a strong signal to initiate or add to long positions in Zalando.
• The path to the 2028 EBIT margin target of 6-8% is clearly defined; investors should closely monitor quarterly reports for evidence of gross margin expansion and, specifically, improvement in the fulfillment utilization rate from its current 60% level.
• While the long-term outlook is positive, the acknowledged slowdown in online penetration growth compared to pre-Covid levels introduces execution risk, making it crucial to watch for the effectiveness of the differentiated B2C strategies in capturing market share in a more competitive environment.