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Investing.com -- Zalando (ETR:ZALG) shares fell over 4% on Monday after Morgan Stanley (NYSE:MS) lowered its price target to €25.50 from €28.50, warning of growing disruption from TikTok Shop’s expansion into Europe.
The brokerage reaffirmed its "underweight" rating and trimmed earnings forecasts, citing rising competitive pressures as social commerce gains traction.
TikTok Shop officially launched in Germany and France in March 2025 and has quickly gained momentum with younger consumers.
Its short-form video format and influencer-driven content are changing how consumers discover and purchase apparel.
Morgan Stanley flagged TikTok’s ability to drive “inspiration-led” purchases, posing a medium-term risk to Zalando’s growth and relevance.
In the U.K., where TikTok Shop has operated since 2021, it reached more than €4.5 billion in gross merchandise value (GMV) in 2024, accounting for 3.2% of the total e-commerce market and 5.3% in online apparel and footwear.
This made it the fourth-largest online fashion retailer in the country, behind Next (LON:NXT), Amazon (NASDAQ:AMZN), and ASOS (LON:ASOS), but ahead of M&S.
Zalando became a preferred logistics partner for TikTok Shop in Germany, France, and Italy earlier this year.
While this adds a new revenue stream through its ZEOS logistics arm, the report warned that it could also support a competing platform, potentially cannibalising traffic and orders on Zalando’s core marketplace.
ZEOS operates on a lower EBIT margin than Zalando’s direct-to-consumer business and could weigh on overall profitability if it becomes a larger part of operations.
Morgan Stanley maintained its 2025 GMV estimate of €16.36 billion but cut its projections for 2026 and 2027 by 2% and 5%, respectively.
Revenue forecasts were similarly lowered by 2% for 2026 and 6% for 2027.
Adjusted EBIT estimates for 2025-2027 were reduced by 3% per year, now standing at €561 million in 2025, €648 million in 2026, and €745 million in 2027. EPS projections were cut to €1.42, €1.66, and €1.90 over the same period, respectively.
The bank’s valuation is based on a blend of discounted cash flow (DCF) and P/E multiple methods. The DCF model assumes a 10.8% weighted average cost of capital and a 2.5% terminal growth rate.
Revenue growth assumptions were revised downward, with the 10-year CAGR trimmed from 3.8% to 3.2%, reflecting lower medium-term growth expectations as TikTok expands its presence.
Morgan Stanley noted that Zalando’s current customer base skews older, but future growth likely depends on engaging Gen Z and Alpha demographics, where TikTok’s influence is strongest.
The report emphasized that even a small shift, such as one in 20 orders moving to TikTok, could flatten Zalando’s year-over-year GMV growth.