A quarter that disappointed the street has resulted in a share pullback in theScore (TSXV:SCR) that investors should take advantage of, says Mackie Research Capital analyst Nikhil Thadani.
This morning, theScore reported its Q3, 2017 results. The company lost $2.92-million on revenue of $6.4-million, a topline that was up 4.9 per cent over the $6.1-million the company posted in the same period last year.
“Our team is very much focused on the imminent rollout of some significant new features for our flagship app as the start of football season draws closer,” said CEO John Levy. “We’ve already begun testing some of these with a small percentage of users and the early signs suggest we’ve got something that will further strengthen our position as the No. 1 challenger app to ESPN in North America. The evolution of theScore app will be an ongoing process to ensure we’re meeting the demands of sports fans on mobile devices. We’re also seeing positive progress in growing the engagement and size of our off-platform audience, including theScore Bot for Facebook Messenger and with our e-sports video strategy. Our continued growth in revenue, underpinned by our diligent focus on managing our expenses, means we remain well on track to be adjusted EBITDA positive in fiscal 2018.”
Thadani says the pullback in shares of theScore “seems a bit harsh”.
“Q3 (May) tends to be seasonally soft and despite some lumpiness in US revenue and seasonal user base softness, we have higher confidence in SCR’s F2018 EBITDA break-even inflection and potential F2018 revenue/valuation catalysts,” the analyst says. “Importantly, SCR’s cost structure appears to be stable, which should provide meaningful positive operating leverage in seasonally stronger periods.”
In a research update to clients today, Thadani maintained his “Buy” rating and one-year price target of $0.45 on theScore, implying a return of 165 per cent at the time of publication.
Thadani thinks theScore will generate EBITDA of negative $4.51-million on revenue of $27.2-million in fiscal 2017. He expects those numbers to improve to EBITDA of positive $831,000 on a topline of $32.1-million the following year.