theScore looks overbought, this portfolio manager says

With a new deal to enter the online sports betting market in New Jersey, investors are placing their bets on theScore (theScore Stock Quote, Chart, News TSXV:SCR), but if you haven’t already got in on the action, you may be too late, says Keith Richards of ValueTrend Wealth Management, who says that is now overbought.

Earlier this month, Toronto-based theScore announced that it had been granted initial approval from New Jersey regulators to launch its Internet and mobile sports wagering platform in the state, a big splashy touchdown for theScore which up until now had been known for its sports apps company delivering news, scores and fantasy updates. The company has already completed a soft-launch in New Jersey and is now approved to full implementation of its mobile sports wagering applications.

“This is a huge milestone and a result of the tireless hard work that has gone into getting our sportsbook ready for launch,” said John Levy, Founder and CEO, in a press release. “We can’t wait to debut a best-in-class sports betting offering in New Jersey, delivering a truly unique and holistic sports media and wagering experience for fans.”

The market certainly liked the news, taking the stock from the $0.30 range where it had been hanging out for a couple of years up to as high as $0.72 per share last week. Even with a pullback since, SCR is up 117 per cent year-to-date.

But there are signs that the party’s now over, at least for a while, says Richards, president and chief portfolio manager at ValueTrend, who spoke to BNN Bloomberg on Thursday.

“I’ve never owned this stock. It’s had a big breakout. It’s great for shareholders. Woulda, coulda, shoulda — we don’t buy small cap stocks and small price stocks,” Richards says. “If you looked at traditional momentum indicators like RSI and stochastic you would see that it’s pretty overbought right now. I don’t even have to look at the indicators, I can see by the shape of the chart.”

“Typically, you get these spikes and then you get consolidation. Now, it doesn’t automatically follow after that and if the fundamentals are there, it might just go sideways for a bit. I’d probably be not expecting it to keep arcing up like that,” he says.

Earlier this month, theScore closed on its previously announced private placement for proceeds of US$10 million, US$7.5 million of which has been subscribed by Penn National Gaming, with whom theScore has a partnership allowing it to offer its betting and i-gaming across 11 states via Penn’s casinos and racetracks.

Analyst Rob Goff of Echelon Wealth Partners gives theScore a “Speculative Buy” rating with a 12-month price target of $0.80, saying that the company has a clear opportunity to tap into its existing sports media platform user base to grow market share in sports betting in New Jersey, a state which has already seen successful penetration by Draft Kings and FanDuel.

“[TheScore’s New Jersey announcement] reaffirms our inclusion of theScore in Echelon Wealth Partners’ Top Pick Portfolio at the beginning of Q319,” writes Goff in an update to clients on August 16. “We continue to see value in the shares ahead of monetization of sports betting and eSports where user/viewership continues to strengthen across app users and social platforms.”