Equity research CDON: CDON segment likely a drag on Q4 growth

Our research indicates a moderate sequential growth of visits to CDON Group sites in Q4 2024. Like the previous quarter, Fyndiq appears to be the main positive contributor. At the same time, we gather that traffic to CDON sites is about unchanged compared to the previous quarter (but visibly down compared to Q4 2023).

We would point out that historical comparisons for traffic to CDON sites may have been affected by a stricter policy on bots following the transition to a single (i.e. the Fyndiq) back-end platform. Hence, there is some uncertainty when translating traffic development to Gross Merchandise Value (GMV), as the conversion rate may well have improved. However, all in all, we believe the data indicates that growth for the CDON sites, specifically, is still elusive. This, in turn, is a drag on sales momentum for the whole group. If our research is accurate, the relatively slow traffic is somewhat disappointing, given the steps taken to improve supply and customer experience in 2024. However, we are still optimistic that the measures will contribute to growth and improved financial performance in 2025.

Arguably, the early signals from e-commerce companies regarding Q4 are mixed. For example, Boozt lowered its guidance (again) on weaker Christmas sales than expected. In contrast, Zalando recently announced it reached the upper end of its GMV guidance for FY 2024.

Despite our now-assumed GMV contraction in Q4 2024, we do expect a small EBITDA increase due to a lower cost base. In contrast to the previous quarter, we also foresee good cash conversion in Q4, aligning with the seasonal pattern.

We reduce our estimates ahead of the Q4 2024 report

We have become slightly more cautious regarding the outlook for CDON and lower our sales and earnings estimates. This mainly impacts Q4 2024 but also affects 2025-26 forecasts (see table below). As a consequence, we lower our base case valuation by some five per cent to SEK 138 (146) per share. We will review our forecasts and valuation in more detail in conjunction with the Q4 report on 13 February. For the valuation, our lower estimates are somewhat mitigated by a peer multiples appreciation compared to our Initial coverage report from the end of October. Following an almost 45 per cent slide in the past 12 months, we calculate that the share is valued at a discount to relevant peers (EV/Sales NTM).

Read our initial coverage report here.

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