Echelon Wealth Partners doubles price target on theScore

Mobile sports app company theScore Inc. (TSXV:SCR) is ready to take advantage of legalized sports betting and the growing interest in eSports, says Rob Goff of Echelon Wealth Partners, who has upped his target price to $0.50 (from $0.25) while maintaining his “Speculative Buy” rating for SCR.

theScore announced its three- and nine-month quarterly results on Wednesday, posting revenue for the quarter ended May 31, 2018, of $7.2 million, up from $6.4 million for the same period in fiscal 2017. EBITDA loss for the quarter was $44,000, compared to a $2.2 million loss in F2017.

“It’s been an exciting period for theScore,” said CEO and founder, John Levy, in a press release. “We’ve seen continued strong app user growth on our iOS platform, a new monthly record of more than 50 million sports fans reached on our social and emerging platforms, and last week’s launch of theScore on Bixby to increase our presence on Android devices.”

Goff says the theScore’s app user numbers remained relatively flat for the quarter, as the nine per cent gain in iOS users was offset by declines in Android users. The analyst says he’s encouraged by growth in theScore’s Youtube subscribers as well as the recently announced deal for the theScore to be the default supplier of sports scores and news to Bixby, Samsung’s digital assistant in the US.

But it’s the opportunities presented by eSports and legalized sports betting in the United States that’s the main attraction for Goff.

“While user trends for the legacy app remain a concern, we believe the recognition of theScore’s potential to monetize on sports betting will buy time for the company to strengthen its legacy app users, monetize on eSports and social platform audiences and bring clarity to its sports betting monetization plans,” says Goff in a client update on Wednesday. “Consequently, we moved our PT to $0.50 reflecting primarily on a revaluation of the shares ahead of the above initiatives gaining traction. Our PT reflects a discount rate of 12 per cent and a terminal valuation of 10x. Social platform and betting valuations against revenues reflect a wide range with an average of 2.4x’s 2019 revenues while theScore is at 3.2x’s.”

The analyst sees SCR generating Adj. EBITDA of negative $0.6 million on revenue of $28.6 million in 2018 and Adj. EBITDA of $3.7 million on a topline of $33.7 million in 2019.

Goff’s target price represents a projected return of 20 per cent at the time of publication.