Overview
Morgan Stanley on Thursday raised its rating on Zalando SE to equal-weight from underweight, saying the recent re-rating of the stock has made the balance between upside and downside more even. The brokerage noted the shares have dropped nearly 50% over the past 12 months and now trade at about 13 times price-to-earnings on 2027 estimates.
Valuation context
By Morgan Stanley's calculation, Zalando's roughly 13x 2027 price-to-earnings multiple sits below the global logistics median of about 14.5x, placing the company toward the lower end of global eCommerce and retail-brand comparables. The bank set a price target of 23. Zalando closed at 22.40 on Feb. 10, with a 52-week trading range between 40.08 and 20.85 and a market capitalization of 5,868 million.
Earnings and model assumptions
Morgan Stanley said its adjusted EBIT forecasts sit below consensus. For 2026 the bank estimates adjusted EBIT of 654 million, roughly 4% below consensus of 678 million. For 2027 it forecasts 756 million, about 8% below consensus of 818 million.
Valuation in the bank's work is produced through a blended approach combining discounted cash flow and price-to-earnings methodologies. The bank applies a 14.5x multiple consistent with global logistics peers. In the DCF component, Morgan Stanley's assumptions include a long-term reported EBIT margin of 6%, a weighted average cost of capital of 11.1% to 11.2%, and a terminal growth rate of 2.5%.
Competitive pressures and revenue mix
Morgan Stanley continues to highlight rising competition for Zalando from social commerce platforms - including TikTok Shop - and from recommerce marketplaces such as Vinted. The brokerage also flagged the potential impact of agentic artificial intelligence on the customer shopping journey. On Zalando's revenue mix, Morgan Stanley estimates advertising activity, referenced as ZMS, contributes about 20% of adjusted EBIT.
Base-case scenario
Under its base case, Morgan Stanley assumes Zalando will maintain its active customer base and that gross merchandise value will grow in the low single digits over the medium term. Simultaneously, the bank assumes Zalando will lose share in online apparel to social commerce, recommerce, and AI-driven platforms.
Industry stance and outlook
The brokerage describes the industry view as In-Line, and it said multiple compression appears to have run its course, with Zalando now trading in line with logistics companies. That assessment underpins the move to equal-weight, as Morgan Stanley judges the risk-reward to be more balanced at current levels.
Additional note on valuation tools
The write-up referenced a Fair Value calculator that uses a mix of 17 industry valuation models to aid investors in assessing whether a stock like ZALG is undervalued. The commentary positioned such tools as a means to compare the company's current market price with model-driven fair value outputs.
This article summarizes Morgan Stanley's published views and estimates without endorsement or additional projection beyond the bank's stated assumptions.