Żabka Stock Slides After Citi Downgrade Cites Valuation Concerns

Shares of Żabka Group SA (WSE: ZAB) declined sharply in Tuesday trading after analysts at Citi downgraded the stock, creating a catalyst for investors to take profits following a recent record-setting rally.

Citi Downgrade Triggers Sell-Off

The primary driver for the sell-off was a research note from Citi, which lowered its rating on Żabka stock to Sell from a previous Neutral rating. The bank assigned a price target of zł25.00, implying significant potential downside from its recent trading levels, according to a report from Investing.com.

The downgrade represents a notable shift in sentiment. Prior to Citi's note, the analyst consensus on the stock was largely positive, with nine buy ratings, five holds, and just one other sell rating.

Valuation Concerns Follow Acquisition Rumors

The downgrade comes on the heels of a dramatic surge in Żabka's share price, which recently hit a new 52-week high of zł33.88. The rally was fueled by reports that Seven & i Holdings, the Japanese parent company of the 7-Eleven convenience chain, was in advanced negotiations to acquire a significant stake.

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This rapid ascent left the company's valuation appearing stretched to some market observers. The bearish call from a major institution provided a trigger for investors to lock in gains after a rally that reportedly reached nearly 30% in a single month.

Dividend Timing Adds Pressure

Adding to the downward pressure is the timing of the company's inaugural dividend. Tuesday is the last session for investors to buy shares and be eligible for the PLN 0.53 per share dividend.

The stock is set to trade ex-dividend on July 24, a technical event that often prompts selling from short-term traders who employ dividend-capture strategies. Broader market conditions offered little support, with Poland's WIG20 index trading in a tight range, leaving Żabka to contend with its stock-specific headwinds.