In a research update to clients today, Thadani reiterated his “Buy” rating and one-year price target of $0.35 on theScore, implying a return of 141% at the time of publication.
While shares of the stock slid through much of last year, the analyst says people are missing that is has now fell far below its peers on valuation comparables.
“We believe SCR’s current valuation at ~$8/user vs. ~$13-20/user range prior to daily fantasy run up in H1 C2015 sets a low bar,” Thadani says. “SCR could benefit if new product/regulatory catalysts could excite investors. Industry consultants believe 18 states in the USA may move to introduce licensed sports betting bills, with 11 having a good chance of passing legislation, which could lead to the largest simultaneous expansion of regulated gambling in U.S. history with regards to sports betting in 2018. We believe a positive move here could benefit SCR. Q1 (Nov) results, yesterday were more or less in-line with consensus (our estimates were too aggressive), despite some tapering of Android app users and lower US direct sales. As such, C2018 should benefit from winter Olympics and enhancements to SCR’s golf offering. The company has been very busy on the product side (Amazon Alexa skill, Facebook chatbot improvements & recent Instant Games launch). We expect benefits from these new improvements in the medium term.”
Thadani thinks theScore will generate EBITDA of negative $1.9-million on revenue of $27.8-million in fiscal 2018. He expects those numbers will improve to an EBITDA loss of $200,000 on a topline of $32.3-million the following year.