Zalando share price has crashed in the past few months and has formed a head-and-shoulders pattern, pointing to more downside. ZAL stock was trading at €28.30, down by 30% from its highest point this year, meaning it is in a bear market.
Zalando share price technical analysis
The daily chart shows that the Zalando stock price has been in a downtrend this year, a drop that has made it one of the top laggards in the DAX Index. It has formed a death cross as the 50-day and 200-day Exponential Moving Averages (EMA) have crossed each other.
Zalando share price has also formed a head-and-shoulders pattern, a popular bearish reversal sign. The head is at €39, while the two shoulders are at €35.8, and the neckline is at €28.
This pattern often leads to a strong bearish breakout. It has also moved to the 50% Fibonacci Retracement level at €27.9. Therefore, the stock will likely have a strong bearish breakdown in the coming weeks. If this happens, the most likely scenario is where it tumbles to the psychological point at €20.
The bearish trend will become invalid if the stock rises above the 23.6% Fibonacci Retracement level at €34.30.
Growth concerns remain
The Zalando share price has plunged, even after the company published strong financial results. Its gross merchandise value (GMV rose by 6.5% in the first quarter to €3.5 billion, translating to a revenue growth 7.9%. It had a quarterly revenue of over €2.4 billion.
The results also showed that most of its revenue came from the business-to-consumer segment, which made over €2.18 billion in revenue. Its business-to-business made €240 million, a €25 million YoY increase.
Most importantly, Zalano has started focusing on profitability, with its quarterly EBIT and net income growing to €46.7 million and €7.7 million, respectively.
Other non-financial metrics also improved last quarter. The number of active customers in the trailing twelve months jumped to 52.4 million, up from 49.2 million a year earlier.
This growth increased the number of orders, which rose to 58.5 million from 55.2 million the previous year.]
The management has been pivoting its business to the more upmarket segment as it seeks to ameliorate competition from companies like Shein and Temu. It achieves this by adding luxury brands like Marc Jacobs to its platform.
At the same time, management has also adopted acquisitions to drive growth. It acquired ABOUT YOU, a move that it expects will generate over €100 million in annual synergies. ABOUT YOU’s business has over 12 million customers and sells over 4,000 brands.
Therefore, these positive catalysts are bullish for the stock, which explains why Jefferies analysts initiated it with a buy rating. The analysts cited its healthy growth and margin expansion.
Therefore, the most likely scenario is where the Zalando stock price continues falling in the near term because of its technicals and then rebound later this year.
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