Insider trades can give investors a more complete view of activity within the world’s publicly-listed companies. No one knows more about a company, and its prospects, than its leaders.
In this report, we are going to highlight some large insider purchases at Zalando SE (ZAL:GR). Zalando is Europe’s largest online fashion platform. Founded in 2008, it currently operates in 17 countries and sells products from over 3,500 brands. The company is listed on Deutsche Börse’s Xetra and has a market capitalization of €23.4 billion at present.
Zalando: Insider Buying
Our records show that between 6 April and 8 April, Zalando board member – and third-largest shareholder overall – Anders Holch Povlsen purchased stock three times. In total, the insider bought 462,517 shares, spending just under €40 million on ZAL stock.
Previous Insider Trades Have Been Timed Well
Zalando is a stock that has generated a number of very profitable insider trading signals in the past.
In May last year, for example, we noted that Chairman of the Supervisory Board Cristina Stenbeck had purchased 38,000 shares, spending nearly €2 million on stock. We saw this insider purchase as a bullish signal. Since then, Zalando’s share price has risen about 70%.
Meanwhile, in March 2019, we noted that Mr. Povlsen had spent approximately €14 million on stock when the share price was around €33. We viewed this insider activity as bullish. In the next six months, the stock rose about 35%.
This latest insider trading activity also looks quite bullish. Mr. Povlsen has significant experience in the retail industry. Currently, he is CEO of international clothes retailer chain Bestseller which is the largest shareholder in ASOS, and also owns brands such as Jack & Jones, Selected, Vero Moda, and Only. He first invested in Zalando in August 2013 when he acquired 10% of the shares in the company. The fact that he has spent €40 million on ZAL stock suggests that he is confident the stock is undervalued at present.
Zalando delivered a strong performance in Q4 2020. For the quarter, revenue came in at €2.6 billion, up 30% year on year, while adjusted EBIT was €189.3 million, up 71% year on year. Adjusted EBIT margin came in at 7.4% compared to 5.6% in Q4 2019. At the end of the period, the company had 39 million active customers versus 31 million at the end of 2019.
Looking ahead, Zalando said it expects to keep generating strong growth. For FY2021, it is targeting revenue growth of 24%-29%. Meanwhile, by 2025, it is targeting gross merchandise volume of €30 billion.
Despite these strong results, Zalando shares have underperformed in 2021. Currently, the stock is down for the year. The stock purchases from Anders Holch Povlsen suggest that he sees value at current levels. We see this insider activity as bullish.