Inditex has made history again this week by touching 47 euros and reaching a new high in its stock market history. The milestone occurs after the presentation of the results of its first fiscal quarter, which continue to set records, although showing a slowdown in growth. The textile company repeats as one of the best companies on the market – this year it has accumulated an increase of 18% – and with more followers (53% of analysts recommend buying); Yes, it is the lowest percentage since the end of 2021. Meanwhile, 34.5% are inclined to hold and 12.5% are inclined to sell. The target is 47.21 euros, which barely leaves any potential. “The capacity for surprise is increasingly limited; What may rise will be more due to the market’s support. It is difficult for it to exceed 50 euros,” comments Alberto Roldán, professor of Economics and Finance and advisor to New Growth Capital. However, some firms, such as HSBC, do consider this possibility, since they estimate a valuation of 53 euros.
For Javier Cabrera, from XTB, the latest numbers published by the company are important. “It continues to show great solidity and a strong competitive advantage that allows it to have wide margins in a sector with a cyclical component. In fact, in the first quarter it was able to increase its margins and reduce inventory levels, which means it continues to have room for operational improvement.” He asserts, on the other hand, that “to copy Inditex’s business model, several years of investments and a logistical reorganization are required, so it is difficult for its competitive advantage to erode in the short term.” Despite the accumulated rally, the XTB expert says that “Inditex continues to be a company to take into account for any investor. It is not going to grow at 30%, but it can do so at a good pace and carry out an attractive remuneration policy. It has net cash, which gives it a very wide range of possibilities to allocate capital.”
Javier Tejedor, of Singular Bank, expresses himself along these lines: “Although growth in subsequent years will moderate, it could be enough to provide the investor with an expectation of sustained long-term profitability above the market average.”
Meanwhile, Divacons AlphaValue maintains it in its model portfolio. It highlights “a consistently solid cash position thanks to its growth and profitable profile, which provides a powerful engine to support the group and always be able to move ahead of the industry”; “It has the best integrated online and offline model, with the resulting inventory control and faster deliveries, and an extremely flexible supply chain that has allowed it to align with consumer trends.” Regarding future prospects, the firm says that “the strength of the tourism sector will continue to drive fashion retail demand for next year. It should be noted that Inditex brands, especially Zara, have lower average prices in their domestic market, and in other countries they offer special collections that are not available in all stores. Especially, Asian tourists returning to Europe in 2024 will drive growth. Furthermore, online fashion penetration in Spain remains low (22%) compared to other countries such as the United Kingdom (33%) and Germany (34%).”
As the main challenge, Cabrera points out that “Shein can take away market share.” “Inditex is trying to mark distances with a higher quality image but still at affordable prices. On the contrary, Shein offers fast fashion at a very low price, and in Spain it has a greater market share in online shopping. “Inditex has to continue improving both sales channels to offer the customer a unique experience.”
A stock market value greater than the sum of Santander and BBVA
Trajectory. Inditex has just completed 23 years on the stock market, consolidating itself as one of the most profitable IPOs in history. The starting price on May 21, 2001 was 14.7 euros. Since then, it has accumulated a rise of 213%. The company has been able to cope with the health crisis, the war in Ukraine and Russia, inflation, weakness in consumption, volatility in exchange rates and growing competition from Asian countries. In fact, it has maintained a rally since September 2022, rising 119% in the period. The capitalization has exceeded 143.8 billion euros, which in addition to being the largest on the Spanish stock market, is 83% above the value of Iberdrola and more than that of Santander and BBVA combined. Inditex has increased the dividend distribution by 28%, with a payment of 1.54 euros per share (ordinary and extraordinary) charged to 2023 results.
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