PRTY

Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), Party City Holdco Inc (PRTY), Walmart Inc (WMT)

Highlights

The presenter is long shares of Party City Holdco Inc (PRTY), which he believes is incorrectly viewed as a structurally challenged brick and mortar business. While the stock chart and financials over the last two years seemingly support this sentiment, the presenter notes this is not the case. From 2016 – 2018, PRTY was growing and generating EBITDA of ~$400MM per year. Since then, the company has been negatively impacted by external catalysts, such as the helium shortage in 2019 that impaired its profitable balloon business and the ongoing COVID-19 pandemic. These events have obfuscated what he considers “a gem of a business.” He views PRTY’s current ~$8 share price as undervalued based on its underappreciated business quality and position in the competitive landscape, its improvements over the last year (e.g., deleveraging efforts, changes to the management team, operational restructurings), and pent-up demand from consumers. He models a price target of $20 – $25 per share applying base case assumptions of a 2021 EBITDA recovery to ~$400MM, net debt falling to ~$900MM by year end 2021, and the stock trading at its historical 8x – 9x EV/EBITDA multiple (it currently trades at 10x the Street’s $237MM expectation and 6x the presenter’s estimate). He sees further upside if pent-up demand and operational restructuring drives 2021 EBITDA above $400MM in 2021 and compounds thereafter.