The stock of the week is Inditex.


Zara, Massimo Dutti, Bershka, those are only some of the brands owned by the Spanish giant Industria de Diseño Textil (Inditex). Although it has always been considered one of the favorite stocks of the Iberian country, Inditex has suffered from the tightening of margins. This is not unique for Inditex, major retailers around the globe have been losing a significant number of customers to companies such as Amazon. The traditional retailers will need to reinvent their business models if they want to survive the new trend.

On December 15, we issued a report on Inditex, where we signaled that the stock was overpriced, and we gave it a fair value of 23.37 euros. At that time the stock was trading at 29.96 euros. It was 28.20% higher than our target price! Important Investment Banks were valuing the stock between 32 – 38 euros a share. Nevertheless, it didn’t take much for the stock to reach our target price and it hasn’t moved much since then.

Yesterday we analyzed the latest earnings result of the company and after careful consideration, we arrived at a new fair value of 25.65 euros. This implies a 1.91% upside from yesterday’s close. At the current time we do not see significant reasons to buy or even sell the stock. New results will be key for a future upgrade or downgrade on our fair value.

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