PLBY Group: Taking PLBY a notch higher on our Best Idea Long list – ahead of DLTR and behind CPRI and DUFRY. Though we’re still 40% ahead since making this call at $25, the reality is that the stock has traded like death since early May and the fundamental story has only strengthened from where we sit. The stock peaked at $59.60 in early May, and has traded down on fears of a PE-led share dump, taking the stock down 40% in just 8 weeks. While a stock sale by sponsor Rizvi is an eventuality with this story, we think it’s largely in the stock at current levels. In addition, the Honey Birdette acquisition is money from where we sit. Consensus estimates have barely budged since the deal was announced, despite the fact that there’s $500mm in revenue runway at a 20s EBITDA margin in the US alone over a TAIL duration. This was the best possible deal PLBY could have done to solidify its portfolio in the sexual wellness category – as it now has Yandy at the low-end, Playboy at the mid-high-end, and Honey Birdette at the premium price point end of the spectrum. It now has a premium International presence with a growth runways in the US and Europe, solid ecomm exposure, and has some of the best design and branding talent in the business. We think this Honey Birdette deal alone gets PLBY to the $100mm EBITDA goal in 5-years, which ignores the upside from growth in style and apparel, grooming/cosmetics (which comes in house in 2H), spirits, and hospitality. Then there’s the EBITDA upside as PLBY renegotiates its licensing royalty business – which is at an egregiously low 2% royalty rate – and should double over a TAIL duration. Then there’s the India JV, and NFT optionality – which got another shot in the arm last week with the Miami Beach collection NFT launch. Ultimately, we think that revenue and EBITDA estimates are too low across all durations, and that this company will be generating cash flow 3x the consensus by year 5 of our model, which puts PLBY on track to a $10bn market cap vs its current $1.4bn. This name is not for the faint of heart, or the risk-averse, as the volatility in the name is fierce. But the roadmap to a 5-6x bagger over a TAIL duration is clear to us as we re-evaluate the research call. It’s a complex story, and people aren’t doing the math on the many ways to get paid on this 68-year-old startup. We’re buyers on recent weakness.
