YB new stock pitches (Tue, Oct 15)

Gannett Co., Inc. (GCI) is progressing in its transformation to a digital media company, with digital revenues expected to exceed 50% of sales in the coming year. The company's anti-trust case against Google, similar to the DOJ's strong case, is being overlooked by the market. Represented by Kellogg Hansen on a contingency basis, a favorable verdict could potentially erase Gannett's debt. Trading at 2x EV/EBITDA compared to The New York Times' 19x, Gannett could reach a $4B market cap at half of NYT's multiple. Risks include weakness in print advertising, while upside potential stems from the ongoing transformation, the lawsuit, and potential non-core asset sales. Currently, the stock appears mispriced at 0.3x revenue and over 40% normalized free cash flow yield. The market seems focused on historical challenges rather than potential upsides, presenting a significant investment opportunity if the transformation and legal case succeed.

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PetMed Express (NASDAQ: PETS), trading at $3.90 with a market cap of $80.3 million, is undergoing a turnaround under new CEO Sandra Campos. The company, which sells pet medications and supplies, has refocused on its core pharmacy business and cost-cutting measures. In Q2, PETS reported GAAP earnings of $0.18 per share, annualizing to a 5.5x P/E ratio. The company aims to expand its AutoShip program (currently 56% of business) and increase private label prescriptions (less than 5% of business). Campos has already reduced G&A expenses significantly and returned the company to profitability. With a 12x P/E target, the stock could reach $8.64, representing 117% upside. Risks include fierce competition in the online pet market and execution challenges for the new management team. Catalysts include continued profitability, potential resumption of capital returns to shareholders, and possible sale rumors. The stock has traded between 12-38x earnings over the past 9 years, with a recent industry acquisition at 15x TTM EBITDA providing a valuation benchmark.

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Castor Maritime (CTRM) presents a compelling yet risky investment opportunity, trading at a $40 million market cap despite $180 million in net cash and $173.4 million in vessels. The company reported $44 million in net income for H1 2024, including significant one-time gains. However, several red flags exist: incorporation in the Marshall Islands, a history of shareholder dilution, a complex preferred shares structure with Toro Corp, and potential conflicts of interest with CEO Petros Panagiotidis, who controls both companies. The stock trades cheaply due to illiquidity and industry cyclicality. The maritime industry outlook remains uncertain, with potential oversupply risks following pandemic-driven demand. While CTRM offers a notable net-net opportunity, trading at just 22% of its net cash, investors must weigh the significant risks against the potential upside.

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