Launching Coverage of Allegro With Wide Moat, PLN 37 Fair Value Estimate; Shares Slightly Cheap

We're launching coverage of Allegro with a wide moat rating and PLN 37 fair value estimate, leaving shares trading at a 12% discount to our intrinsic valuation. The Polish holding company is well-positioned to capitalize on e-commerce growth in Central and Eastern Europe, or CEE, also boasting exposure to the Czech Republic, Croatia, Slovakia, Slovenia, and Hungary following its Mall Group acquisition, which was consummated during the first quarter of 2022. We foresee a robust, long-term growth runway, with our forecasts calling for a 12% 10-year sales CAGR, driven by 11% annual growth in gross merchandise volume and modest take rate expansion. While the firm faces competition from large, multinational competitors like wide-moat Amazon and wide-moat Alibaba in its home market, we believe that investments in its Prime-like loyalty program, Smart!, managed fulfillment, an improved buyer protection program, and auxiliary financial services will prove sufficient to defend its home turf--a view corroborated by ongoing web traffic outperformance relative to Amazon and the exit of no-moat Sea Limited from the Polish market.