We flag the following risks to the shares achieving our price target:
Macro – If GDP growth and consumer softens, this could lead to weaker GMV growth. Additionally, if ecommerce penetration improves slower than expected, this could result in softer growth for Allegro.
International markets – If Allegro comes short of expectations on farther restructuring of Mall business and the expansion of its Allegro platform in the neighbouring countries would face unexpected headwinds, this would translate into more downward pressure on EBITDA.
Regulatory Risks – any unfavourable regulatory change (eg, data protection, the digital ‘tech tax’) could have an adverse impact on the valuation of the group and its operations.
Potential change in ability to track and target consumers for online advertising (data privacy increases) could lead to a reduction in the ability to target advertising in as efficient way, which could impact the level of customer acquisition costs and return on marketing spend.
Shareholder Overhang – the private equity still owns some 40% of the shares.
If the impact on the company from any of these factors differs from our base case expectations, the stock could have difficulty achieving our target price.
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