Keep an eye on Score Media as pro sports returns: Echelon

Score Media and Gaming (Score Media and Gaming Stock Quote, Chart, News TSXV:SCR) has seen its share price yo-yo in 2020 but Echelon Wealth Partners analyst Rob Goff thinks the return of professional sports will bring upside to SCR.

Goff reviewed Score Media’s latest quarterly report in an update to clients on Thursday, where he maintained his “Speculative Buy” rating for the stock and raised his target price from $0.80 to $0.95 per share.

Digital media and sports betting company Score Media delivered on Tuesday its fiscal third quarter 2020 results for the period ended May 31, 2020, with the numbers telling the tale of a dearth of sporting events during COVID-19 times. SCR’s revenue for the Q3 dropped to $2.4 million from $8.5 million a year earlier while the company posted an EBITDA loss of $9.0 million versus a loss of $1.1 million a year ago.

Score Media took some steps to lessen the blow of the pandemic by reducing discretionary expenses, making use of government subsidies and having senior management shift 25-per-cent of their pay for a four-month period to Restricted Stock Units. The company said it ended the quarter with $17.6 million in cash on hand and $5 million remaining on a revolving credit facility.

“The past quarter has been a period of unprecedented challenge, as the world grappled with the vast impact of the COVID-19 pandemic, including the disruption of nearly every major sports league and event,” said John Levy, founder and CEO, in a press release.

“During this period, we have continued to press ahead at full strength on key initiatives, including the development of our mobile sports book, theScore Bet, and we remain on track for our multi-state roll-out into Colorado and Indiana later this summer, subject to receiving all relevant licenses and approvals,” Levy said.

Looking at the financials, Goff had been calling for revenue and EBITDA of $4.6 million and negative $4.9 million versus the resulting $2.4 million and negative $9.0 million. But the analyst said Score Media’s $17.6 million in cash will leave it with considerable flexibility, although Goff said his forecasts and price target “remain directional with significant sensitivity around the timing and tenor of a return to sports, betting, and the economy.”

“We remain bullish that SCR will leverage the strength of its legacy app user base to gain an attractive share of the emerging sports betting market. The Company’s initial launch into the New Jersey market has served to highlight its user leverage along with its technological prowess in introducing an integrated product that stands differentiated from its peers. We expect to see similar traction and leverage in Colorado and Indiana as sports activities resume,” Goff said.

For the full fiscal 2020 (ended August 31), Goff is forecasting $22.3 million in revenue compared to $31.1 million for 2019 and an adjusted EBITDA loss of $29.4 million compared to a loss of $6.5 million a year earlier.

At press time, Goff’s new $0.95 target represented a projected 12-month return of 35.7 per cent.