Allegro Earnings: Raising Our Fair Value Estimate by 27% on Robust Ads, Fintech Business Tailwinds

Wide-moat Allegro reported strong quarterly results, with PLN 2.48 billion in revenue beating our PLN 2.44 billion estimate as transaction-driven growth in Poland remains strong (up 10% annually) despite stout macroeconomic pressure in the country and across Central and Eastern Europe. Management's second-quarter guidance suggests an acceleration of current growth rates, with the firm's 150 million global merchants providing compelling value for its nearly 20 million customers in Poland, the Czech Republic, and now Slovakia. While losses in the international business remained wide (PLN 121 million EBITDA loss), significant progress toward growing the more profitable third-party business and limiting the scope of investment to 20% of Polish segment EBITDA implies that these losses should prove palatable to investors. Looking forward, we're encouraged by progress in advertising (25.7% growth at an astounding 92% EBITDA flow-through) and fintech (PLN 30.1 million in quarterly loan origination profit) businesses. Both align closely with our overarching online marketplace thesis: large players are best poised to expand into adjacent services, unlocking substantial potential for incremental economic value creation while solidifying their competitive position. We raised our fair value estimate for Allegro 27% to PLN 46 from PLN 36, leaving shares looking slightly cheap.