In a research update to clients today, Goff maintained his “Speculative Buy” rating on the stock but raised his one-year price target from $0.55 to $0.60, implying a return of 57.9 per cent at the time of publication.
“We continue to see value in the shares ahead of monetization of sports betting and eSports where user/viewership continuesto strengthen across app users and social platforms,” the analyst says. We continue to look for sports betting to stimulate legacy app user growth, strengthen advertising yield gains, and prospectively introduce new revenue streams on transactions. We believe theScore’s focus on mobile users, its heavy ingame usage (~70%), and its scale strengthen its partnership leverage in the betting ecosystem. The impressive success of Draft Kings and FanDuel speak to the value of established client lists and the ability to transfer existing/recent relationships into mobile betting.”
Goff thinks SCR will post Adjusted EBITDA of negative $5.0-million on revenue of $30.8-million in fiscal 2019.
“We continue to caution that investors are likely to see preparation for betting result in higher opex before realizing gains through user stimulation, incremental advertising, and over time, more directly related betting revenues,” the analyst adds. “The Company has been investing upfront to position itself with our estimate that it has taken on incremental betting and eSport costs that we estimate to approach ~$1M quarterly. Betting represents a huge market on its own while it is seen as a significant catalyst for user growth and advertising. theScore’s clear focus and early mover strategy support aggressive prospects across all drivers. We recognize the potential for betting to recalibrate theScore’s user growth and revenues.”
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