2. Pitney Bowes Inc. (NYSE:PBI)
Litespeed Capital Management’s Stake Value: $11.1 million
Percentage of Litespeed Capital Management’s 13F Portfolio: 12.3%
Number of Hedge Fund Holders: 24
Pitney Bowes Inc. (NYSE:PBI) is a shipping services provider that covers the postage segment by providing services such as delivery and sorting. It also provides applications for tracking products in transit.
Ms. Zimmerman’s hedge fund owned 1.5 million Pitney Bowes Inc. (NYSE:PBI) shares during Q3 2021. This translated into an $11.1 million stake which represented 12.3% of its investment portfolio. An Insider Monkey survey of 867 hedge funds for the same period revealed that 24 had owned the company’s shares.
Maxim slashed the company’s price target to $7 from $12 in February 2022, stating that the company’s sorting segment performed well but its global e-commerce business had a tough quarter.
Chuck Royce’s Royce & Associates is Pitney Bowes Inc. (NYSE:PBI)’s largest shareholder. It has a $15 million stake through owning 2 million shares.
Miller Value Partners mentioned Pitney Bowes Inc. (NYSE:PBI) in its third-quarter 2021 investor letter. It stated that:
“Pitney Bowes (PBI) was also a recent laggard off nearly 20% during the quarter. The company has been building out an E-commerce business for the past 10 years that is approaching $2B in revenue and growing revenues longer-term at a double digit pace. With the E-commerce segment approaching scale, management has significant new initiatives underway to help improve the segment’s profitability to normalized levels (8-12% EBIT margins) over the next couple of years. Success on achieving normalized profitability for the segment would dramatically enhance Pitney Bowes earnings (>$1 in EPS) and annual free cash flow generation (>$250M). Last quarter we highlighted, the digital service business within Pitney’s E-commerce segment and the significant embedded value that was suggested by recent acquisition of a direct competitor Stamps.com at 8x revenue. However, another recent market transaction suggests the E-commerce business has even greater embedded value. At the end of the second quarter, Global-e (GLBE), a UK company that focuses on cross-border business came public at $25/share or approx. $4B market capitalization. The initial IPO price suggested, 2021 Enterprise value to Revenue >20x. Since the IPO, GLBE has climbed to greater than $50/share. Within Pitney Bowes’s E-commerce segment there is a much larger cross border business representing approximately $500M in revenue. The current valuation of Global-e suggests Pitney’s cross border business is worth significantly more than the company’s current market cap. With the marketplace valuing many businesses in excess of 10x revenue, we believe that Pitney Bowes shares remain significantly mispriced at only .35x of revenue and >30% normalized earnings and free cash flow yield. In our opinion, the shares are becoming increasing attractive as their E-commerce segment appears to be significantly undervalued and has the potential to unlock significant equity value over the next couple of years.”
