Generative AI And Omnichannel Expansion Will Transform Margins And Earnings Trajectory

Catalysts

About Enjoei

Enjoei operates digital and physical platforms that connect buyers and sellers of fashion and creative goods across Brazil.

What are the underlying business or industry changes driving this perspective?

• Scaling of EnjoPay as an in house sub acquiring platform reduces MDR and financial expenses while optimizing receivables management. This directly supports higher net margins and stronger earnings.
• Ongoing deployment of generative AI agents across customer service and operations lowers service costs and improves user satisfaction. This may support higher repeat purchases and operating leverage in EBITDA.
• Expansion of the omnichannel ecosystem through new franchises and company owned stores broadens brand reach and inventory intake. This may position GMV and net revenue to grow faster as the offline network matures.
• Refocused marketing and brand repositioning at Elo Sete toward higher value, more loyal customers increases average revenue and contribution margin per user. This can lift consolidated gross profit and EBITDA quality over time.
• Disciplined capital allocation supported by a robust cash and liquidity position enables continued product and channel investments without dilutive funding. This may sustain revenue growth while supporting improved net income through lower financial risk.

Assumptions

This narrative explores a more optimistic perspective on Enjoei compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Enjoei's revenue will grow by 7.6% annually over the next 3 years.
• The bullish analysts are not forecasting that Enjoei will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Enjoei's profit margin will increase from -7.7% to the average BR Interactive Media and Services industry of 10.3% in 3 years.
• If Enjoei's profit margin were to converge on the industry average, you could expect earnings to reach R$34.4 million (and earnings per share of R$0.17) by about December 2028, up from R$-20.5 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, up from -10.3x today. This future PE is greater than the current PE for the BR Interactive Media and Services industry at 8.3x.
• The bullish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 20.48%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The stability of GMV in the quarter rather than clear acceleration suggests that Enjoei may be reaching a more mature growth phase in its core marketplace. If long-term customer acquisition or order frequency stagnates despite higher marketing efficiency, revenue expansion could undershoot expectations and pressure earnings growth over time.
• The strategy of resuming and scaling performance marketing for Elo Sete after past periods where marketing spend lost support when reduced indicates a risk that long-term customer growth remains too dependent on paid channels. This could lead to structurally higher marketing as a percentage of net revenue and constrain net margins and EBITDA.
• The business model shift toward omnichannel with franchises and company owned stores exposes the company to the long-term secular risk that offline fashion retail remains structurally lower margin and more capital intensive than pure digital. This may dilute profitability and reduce future cash generation required to fund growth initiatives.
• The internalization of payments through EnjoPay increases exposure to credit, fraud and regulatory risks over the long run. If receivables management, funding structures or new credit products are mispriced or poorly scaled, financial expenses could rise again and compress net income despite current MDR savings.
• The optimistic narrative relies heavily on ongoing efficiency gains from technology and generative artificial intelligence. If competitive marketplaces match or surpass these tools or if automation fails to materially increase user retention and order frequency over the long term, the expected operating leverage may not materialize, limiting improvements in gross margin and EBITDA.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Enjoei is R$2.0, which represents up to two standard deviations above the consensus price target of R$1.65. This valuation is based on what can be assumed as the expectations of Enjoei's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of R$2.0, and the most bearish reporting a price target of just R$1.3.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be R$333.2 million, earnings will come to R$34.4 million, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 20.5%.
  
• Given the current share price of R$1.03, the analyst price target of R$2.0 is 48.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.