Mackie cuts price target on theScore, maintains “Buy” rating

Mackie Research Capital analyst Nikhil Thadani says he was too optimistic about theScore’s (theScore Stock Quote, Chart, News: TSXV:SCR) fourth quarter.

This morning, theScore reported its fourth quarter and fiscal 2016 results. In its Q4, the company lost $5.16-million on revenue of $4.98-million, a topline that was up 70 per cent over the $2.9-million in revenue the company generated in the same period last year.

“In just three years we have more than quadrupled our annual revenue, doubled in-app engagement and firmly established theScore as a leader in mobile sports in North America,” said CEO John Levy. “We’ve built out a best-in-class team that’s committed to achieving audience, engagement and revenue growth across our mobile apps, while also expanding our brand presence across established — and emerging — digital platforms to ensure theScore is reaching sports fans wherever they are. We remain on track to deliver on our long-term vision of making theScore a profitable and self-sustaining business and we are excited by what the future holds.”

Thadani notes that the quarter fell below his topline expectations of $5.9-million and the street consensus of $5.6-million. He detailed the culprits of the softness.

“We expected higher monetization benefit from the Olympics and a busier sports calendar this summer, which was too optimistic,” says the analyst. “EBITDA was a loss $3.6 mln (ex. stock compensation), in-line with our estimate and slightly better than consensus loss ~$4.1 mln despite the revenue miss, mostly due to lower personnel and marketing costs. SCR ended Q4 with ~$15.5 mln cash (or ~5¢/sh) vs. our ~$14.5 mln estimate. SCR expects to collect a ~$5 mln tax receivable around Q2 (Feb) F2017.”

In a research update to clients today, Thadani maintained his “Buy” rating, but cut his one-year price target on the stock from $0.80 to $0.50, implying a return of 138 per cent at the time of publication.

Thadani thinks theScore will generate an EBITDA loss of $7.6-million on revenue of $26.8-million in fiscal 2017. He expects these numbers will improve to positive EBITDA of $2.0-million on a topline of $37.7-million the following year.