Spotlight: Billionaire Loads Up on Unlikely Stock

You may not be familiar with Global Blue but it’s certainly grabbed the attention of the investment team at Third Point, run by billionaire Dan Loeb, who have got excited about it and understandably so when you peel back the covers.

The company specializes in tax-free shopping but it’s expanding into financial technology services, and has enjoyed a stunning increase in revenues over the past few years.

As the top line has soared, the bottom line has completed a full U-turn from being deep in the red to back in the black. Yet the share price has stalled, and therein lies the opportunity for new investors.

Key Points

• Third Point has spotted a disconnect between a poor share price performance and improving fundamentals.
• If history is a guide, this tax-free shopping stock could rise substantially over the next few years.
• If analysts are right, an opportunity with 50% upside is on the horizon.

Hidden Opportunity Spotted By Billionaire

With the NASDAQ up over 40% for the year, a lot of stocks have simply treaded water this year have fallen off investor radars and Global Blue falls squarely into that category with its share price sliding 2% for the year.

To give you a sense of the disconnect between price and fundamentals, 5 years ago GB was trading above $13 per share whereas most recently it hovered below $5 per share.

And yet the top line has been on a massive run higher in recent years, climbing by 181.8% in 2022 and 147.3% this year. It’s gone from reporting over half a billion in operating losses three years ago to a slight profit this year.

Those are the kinds of results that will attract any value-oriented investor, let alone billionaire Loeb of Third Point.

So it time to buy?

Is Global Blue Stock a Buy?

There are always reasons not to buy a stock. If you wanted to find some for Global Blue, the long-term debt climbing towards $800 million would be a factor and it’s earnings multiple above 100x would be another.

In spite of those negatives, a discounted cash flow forecast analysis assesses intrinsic value to be 50% higher, placing the share price firmly in the $6 range before realizing its full potential.

The odds are big money institutions will spot the opportunity sooner than later, not least when they see that accompanying the massive revenue growth is a huge spike in gross margins from negative a couple of years ago to an astonishing 60% plus this past year.

A sustained increase in revenues would likely set the company up for even greater margins and higher profits, which in turn should ultimately be reflected in the share price.

How High Could Global Blue Go?

To give you a sense of what’s possible, the most recent year’s top line came in at around $330 million whereas 5 years ago that number was $463 million.

If Global Blue can complete a roundtrip recovery to that revenue level, its share price theoretically could rise as high as it was back then, meaning all the way to $13 per share.

At that time, net income was just $7.7 million and it seems a very reasonable level for the firm to hit once again, not least because it’s expanding beyond tax-free shopping to include financial technology services too.

The bottom line is that Global Blue appears to have been unduly punished by the market, or perhaps more aptly stated, it has flown under the radar and been ignored or missed. But Third Point has spotted the disconnect and taken a position betting on higher prices, and it won’t be a surprise to see them vindicated.