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Carlyle Injects $250M In Online Retailer Pharmapacks; Street Sees 23% Upside
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Carlyle Injects $250M In Online Retailer Pharmapacks; Street Sees 23% Upside

The Carlyle Group disclosed that it has invested $250 million in Pharmapacks, as the US e-commerce platform is benefiting from “unprecedented” growth fueled by the pandemic-led shift to online shopping during the coronavirus pandemic.

Carlyle (CG) said that the investment values Pharmapacks at approximately $1.1 billion. Founded in 2010 as a single brick and mortar pharmacy, Pharmpacks has since turned into an online retail marketplace for health, personal care and beauty products. The online platform has partnerships with consumer brands across e-commerce marketplaces in North America, including Amazon, Walmart, eBay, Target, Google and Facebook.

“We’re thrilled to partner with another founder-led growth company, leveraging the global resources of the Carlyle platform to support Pharmapacks’ acceleration,” said Jay Sammons, Carlyle’s Head of Global Consumer, Media & Retail. “We are focused on identifying companies that are growing significantly faster than the market and benefiting from strong secular tailwinds. As a company sitting at the cross section of a number of attractive trends, including the massive and rapid expansion of ecommerce, we have strong conviction in Pharmapacks’ ability to achieve sustainable growth.” 

After reaching over $250 million in sales in 2019, Pharmapacks said that is on a current run rate to achieve approximately 60% year-over-year growth. This month’s opening of an additional 230,000 square foot replenishment center is expected to fuel accelerated growth in Q4, the company added.

The Pharmapacks investment is part of Carlyle’s long-term global consumer, media & retail strategy in which it has injected more than $21.5 billion of equity to date. Equity capital for the Pharmapacks investment came from Carlyle Partners VII, an $18.5 billion fund that makes majority and strategic minority investments primarily in the U.S. in targeted industries, including consumer, media & retail.

Shares in Carlyle, which have been on a recovery path since hitting a low in mid-March, are still trading almost 15% lower than at the start of the year. (See Carlyle stock analysis on TipRanks)

Oppenheimer analyst Chris Kotowski recently assigned a Buy rating on the stock with a $41 price target (49% upside potential), saying that CG is particularly well-positioned for more uncertain markets because its PE AUM is well diversified across a broad array of more than two dozen major carry funds.

Given the 3Q “net accrued performance fee balance increasing 10% Q/Q to $1.96B (or ~$5.50/share), we think there is a lot of upside to consensus earnings expectations in coming years,” Kotowski wrote in a note to investors. “The investments are also broadly diversified by sector and geography.”

The rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is split between 2 Buys and 3 Holds. That’s with an average analyst price target of $33.70, indicating 23% upside potential over the coming year.

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