Zozo Earnings: Undervalued Amid Concerns Over Conservative Guidance; Maintaining Fair Value

We maintain Zozo’s fair value estimate of JPY 3,500 after fine-tuning our fiscal year ending March 2024 and midterm projections. We believe that the share price decline following the announcement is likely due to concerns about the conservative gross merchandise value guidance from Yahoo Shopping (an online shopping mall on which Zozo is a merchant), that has been driving Zozo’s revenue growth recently. While we expect Yahoo Shopping’s GMV to be sluggish this year due to a reduction in promotion costs, we believe the impact on Zozo will be less than the market fears as Zozotown’s organic growth will offset some of the impact. Our view on the competitiveness of Zozo’s attractive platform remains unchanged and we think the stock is undervalued currently.