Zalando Shares (ZAL) Underperforming – Analyst Raises Price Target, Keeps Underweight Rating

Zalando SE shares (ETR:ZAL) fell sharply to start the week, dropping 5.28% despite an analyst price target raise on the day. Europe's leading online fashion platform, finds itself at a precarious crossroads, with recent analyst actions painting a picture of cautious optimism tempered by underlying concerns.

The stock currently trades at €27.10, a pullback of some 32% from February's highs, and a 15.9% decline since the turn of the year. Despite a recent price target increase from Morgan Stanley, significant headwinds remain, casting a shadow over Zalando's potential for sustained growth.

Morgan Stanley analyst Luke Holbrook's decision to raise the firm's price target on Zalando from €25.50 to €28.50 has done little to temper the mood however, as this seemingly positive adjustment is undercut by the maintenance of an “Underweight” rating, signaling that Holbrook believes the stock will underperform relative to its peers.

This cautious stance suggests that while Holbrook sees some potential for short-term gains, fundamental concerns about Zalando's business model and competitive landscape remain.

This perspective is further echoed by the emergence of a head-and-shoulders pattern in Zalando's stock chart. This is a classic bearish technical indicator, suggesting that the stock may be poised for further downside movement.

Zalando's recent financial performance presents a mixed bag. In 2024, the company reported revenue of €10.57 billion, a modest 4.23% year-on-year increase. Earnings, however, saw a more impressive jump of 202.53% to €251.1 million. The next earnings date, expected in early August, will be a crucial litmus test for the company's ability to sustain this momentum.

CFRA analyst Nazmi Ghazali offered a more upbeat assessment in March 2025, maintaining a “Buy” recommendation with a revised 12-month price target of €38.00. Ghazali believes Zalando is well-positioned to benefit from structural growth in European e-commerce, citing the company's strong brand and partnerships. However, this bullish outlook is not universally shared, with many analysts remaining cautious about Zalando's ability to navigate the challenging market conditions.

The company's current situation is complex and uncertain. While the raised price target from Morgan Stanley provides a glimmer of hope, the underlying bearish sentiment, technical weaknesses, and competitive pressures suggest that an element of caution would be sensible.