In a research update to clients Friday, Goff maintained his “Speculative Buy” rating and one year price tareget of $0.55 on theScore, implying a return of 48.6 per cent at the time of publication. The analyst also announced he is adding the stock to the firm’s Q3, 2019 “Top Picks” portfolio.
“We believe that SCR is undervalued at its current price considering significant monetization potential in-built in its upcoming betting platform to be launched in New Jersey.” the analyst says. “For the most of 2019, the share price has remained range bound between $0.34-0.38 and we believe that market awaits the launch of the betting platform. Management has previously indicated that it looks to introduce betting in mid-2019, subject to required licenses and approvals. We believe that timing the launch prior to the 2019 NFL season would be a natural target. On the eSports side, SCR management decided to shutdown its eSports App on May 1 this year to focus solely on the YouTube channels where they have seen subscriber growth from 30K year ago to currently at 800K+. Sponsorships and product placement advertising would appear to be near-term opportunities with theScore having reached impressive scale.”
Goff thinks SCR will post Adjusted EBITDA of negative $4.7-million on revenue of $29.1-million in fiscal 2019.
“We continue to see value in the shares ahead of monetization of sports betting and eSports where viewership continue to strengthen across social platforms,” Goff adds. “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. However, 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 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.”