Pandora Earnings: Solid Revenue Development in Challenging Conditions; Shares Cheap

We are maintaining our fair value estimate for narrow-moat Pandora after the company reported a resilient second-quarter performance and raised full-year guidance. The company now expects like-for-like sales growth of 0%-2%, versus negative 4% to 0% previously, and organic growth, which also encompasses network expansion and phasing of sell-in to partners, of 2%-5%. Local currency growth is expected at 3%-6% versus 4.9% in our estimates. EBIT margin is expected around 25%, in line with our 24.9% estimate. So far in the third quarter, like-for-like sales growth has accelerated to the midsingle digits and organic growth to the high single digits. We still view the shares as undervalued despite a strong year-to-date rally (up 30%-plus versus a 6% increase in the Stoxx Europe 600 Index), offering over 35% upside to our DKK 930 fair value estimate. Shareholder returns over 12 months through buybacks and dividends amount to around 11% of the company’s market capitalization.