Echelon Capital Markets analyst Rob Goff likes the line on Playmaker Capital (Playmaker Capital Quote, Chart, News, Analysts, Financials TSXV:PMKR), maintaining a “Speculative Buy” rating and $1.20/share target price for a projected return of 172.7 per cent in an update to clients on Wednesday.
Toronto-based Playmaker Capital is a sports media company focused on building highly engaged communities of sports fans in order to deliver value to sports betting companies, leagues, teams, and advertisers. Goff’s updated analysis comes after Playmaker Capital released its first quarter financial results for the 2022 fiscal year.
“We remain resolutely bullish on both the organic and inorganic tailwinds at Playmaker’s back and view recent weakness in the Company’s shares as attractive buying opportunities,” Goff said.
Playmaker Capital’s quarterly results were headlined by $5.8 million in revenue, providing a slim beat in relation to the Echelon Capital and consensus estimate of $5.5 million while producing year-over-year growth of 155.5 per cent. On a pro forma sequential basis, Playmaker also experienced 37 per cent year-over-year organic growth.
Meanwhile, the company’s adjusted EBITDA report of $1.7 million and 28.7 per cent margin came in slightly ahead of the $1.6 million projection set out by both Echelon Capital and the consensus, while producing pro forma sequential growth of 16 per cent and year-over-year growth of 212.2 per cent.
“We have started 2022 the way we completed 2021 – focused on execution. We continue to see strong organic growth from our underlying businesses, and we continue to grow through acquisition,” said Jordan Gnat, Playmaker CEO in the company’s May 16 press release. “We are focused on the profitability of our company and ensuring we invest in people and technology that drive efficiencies and create the necessary foundation for both sustainable organic growth and the ability to integrate new businesses into our ecosystem. We continue to see significant growth of the audiences we engage across our ecosystem.”
In terms of its user base, Playmaker saw strong engagement across the board, highlighted by an 80 per cent increase in its international user sessions to 553 million thanks to key Brazilian assets BolaVIP and Fanaticos, which ranked first and third in their local markets, respectively, with North American user sessions up eight per cent to 92 million and generating 60 per cent of existing revenue.
Notably, Yardbarker made some noise in the quarter with its daily newsletter, The Morning Bark, as it reached 372,000 subscriptions and attained solid engagement with 26 per cent of its subscribers opening it and 95 per cent reading all the way through. In an effort to try and capitalize on monetization opportunities, the company has also launched an afternoon newsletter, Bark Bets, which will focus on daily sports betting.
Playmaker is also looking to position itself as a major player in the affiliate marketing game, with an intent to be ready by September ahead of the NFL, NBA and NHL all starting new seasons.
With the release of the first quarter results, Goff slightly raised his 2022 projection from $28.8 million to $29.1 million, forecasting a near double with a projected year-over-year increase of 96.6 per cent. Looking ahead to 2023, Goff maintains a revenue projection of $34.5 million, producing a potential year-over-year increase of 18.6 per cent.
From a valuation perspective, Goff projects the company’s EV/Revenue multiple to drop from the reported 6.4x in 2021 to a projected 3.3x in 2022, then to 2.7x in 2023, which comes in ahead of the target of 6.3x, but is still slightly behind the projected peer group average of 1.5x.
Meanwhile, Goff maintained his 2022 adjusted EBITDA forecast of $10.1 million for an implied margin of 34.7 per cent. His 2023 forecast also held firm at $12 million, implying a relatively flat margin of 34.8 per cent.
In terms of valuation, Goff forecasts the company’s EV/adjusted EBITDA multiple to drop from the reported 17.4x in 2021 to a projected 9.4x in 2022, then to a projected 7.8x in 2023, which would come in ahead of the projected target of 18.2x and the projected peer group average of 14.5x.
Goff’s final adjustment came to the 2022 operating profit projection, which he lowered from $2.6 million to $1.8 million while maintaining a $4.6 million estimate for 2023.
“We’re encouraged by Playmaker’s consistency in exceeding expectations – albeit modestly against a seasonally weaker quarter in the advertising space – and recognize that the Company has several tailwinds at its back throughout the remainder of the year, culminating with the World Cup in Q422,” Goff said.
Playmaker Capital’s stock price has plummeted to a 40.3 per cent loss over the course of 2022 so far, gradually declining after starting at $0.72/share, having dropped as low as $0.42/share on May 10.