When is the right time to invest in a stock whose price has suffered massive discounts?
The issue of entry and timing is particularly important for short-term investors, while advocates of long-term equity investing tend to brush it aside.
One share from the Dax that many private investors are currently asking themselves is Zalando.
The online fashion retailer has been on an impressive growth trajectory in recent years.
The outbreak of the corona pandemic even intensified this dynamic.
Many people were suddenly forced to work from home.
The stationary trade also had to close due to the lockdown.
Accordingly, more and more goods were ordered online – and thus also at Zalando.
In the meantime, however, the Dax group had to realize that not everything always runs smoothly.
The Corona-related boom phase cooled down somewhat.
In addition, consumers are no longer quite as willing to spend.
Inflation, fears of recession and high energy and food prices are depressing consumer sentiment.
In response, Zalando lowered its forecast over the course of 2022.
Most recently, management had forecast gross merchandise volume growth of 3 to 7 percent to EUR 14.8 to 15.3 billion, while sales growth should have been between 0 and 3 percent to EUR 10.4 to 10.7 billion.
The adjusted operating result (EBIT) should have reached a value between 180 and 260 million euros.
The market uncertainties also ensured that the Zalando share price ended the stock market year 2022 with a minus of around 53 percent.
In addition to the real estate group Vonovia, the online retailer was the biggest loser in the Dax in 2022.
At the end of September 2022, the share reached an annual low of EUR 19 - 14 months earlier the price had reached a record high of more than EUR 105.
The company had a market value of around 28 billion euros.
prospect of higher profitability
A counter-movement has been going on for a few months now.
The Zalando share cracked the price mark of 40 euros, so that investors with good timing could look forward to a doubling in value during this time.
Apparently, investors have come to terms with the fact that Zalando will not grow as strongly as in the past.
Especially since they are compensated with the prospect of higher profitability.
Zalando is doing something right now that a lot of companies are doing right now: Market conditions are making growth difficult, so costs are being cut in order to strengthen the bottom line.
For example, the management had the issue of efficiency in marketing in mind.
In addition, a minimum order value was introduced.
According to the company, this has already led to an increase in the order volume.
Another concern of the management is to expand the business with partner brands and dealers.
The aim is to increase the partner business' share of the gross goods volume in the Zalando shop to 50 percent by 2025.
In this way, the range is also expanded.
Other beauty brands were added to this, for example through the partnership with Sephora, while the Sephora offer was expanded to Italy.
Stock back in long-term uptrend
The expected improvements in profitability have also led to positive assessments by various analysts.
Due to a more optimistic assessment of stomach development, Goldman Sachs, for example, raised the price target for the Zalando share from 42 to 49 euros and confirmed the buy recommendation.
The Canadian bank RBC has in turn raised the price target for Zalando from EUR 35 to EUR 52 and left the rating at "outperform".
In purely technical terms, the Zalando share – measured against the 200-day line – has been on a long-term upward trend since mid-December.
With a 2023 P/E ratio of 24, the stock is only conditionally cheap, but as the American investor George Soros once said: "Anyone who fears losses cannot make any profits."