Zalando's Q3 Shows Slight Pickup in Growth and Profits Boosted by Lower Marketing; Shares Cheap

We are maintaining our fair value estimate of EUR 65 for no-moat Zalando as the company reported third-quarter revenue and stuck to the lower range of its prior full-year guidance. Its guidance implies gross merchandize value growth closer to 3%-7% versus 4% in our models, revenue growth of 0%-3% versus negative 0.8% in our models, and adjusted EBIT in the range of EUR 180 million-EUR 260 million versus EUR 220 million in our models. Since our assumptions were already mostly closer to the bottom range of the guidance, we don’t expect to significantly adjust our forecasts. Zalando is our top pick in the European online apparel segment and remains deeply undervalued.