Bragg Gaming keeps Buy rating with Roth Capital

Roth Capital Partners analyst Edward Engel has tempered his expectations on Bragg Gaming Group (Bragg Gaming Group Stock Quote, Charts, News, Analysts, Financials NASDAQ:BRAG), but he’s still very optimistic on the Canadian gaming technology and content company. In a Friday note where he reviewed Bragg’s third quarter financials, Engel reiterated a “Buy” rating on the stock while lowering his target price from US$9.00 to US$8.00 per share, which at press time represented a projected one-year return of 130 per cent.

B2B online gaming platform and casino content aggregator Bragg Gaming reported Q3 revenue up 62.3 per cent year-over-year to €20.9 million and adjusted EBITDA up 51.6 per cent to €2.2 million. Bragg’s wagering revenue rose 42.4 per cent to €4.6 billion.

“Our record third quarter results reflect significant year-over-year revenue, gross profit and Adjusted EBITDA growth highlighting our progress in providing value-added content and services to a growing global base of customers across regulated iGaming markets, including in North America,” said Yaniv Sherman, CEO, in a press release.

Looking at the quarter, Engel said Bragg beat the consensus estimate on EBITDA by eight per cent, while revenue has been growing every quarter since Q3 2021. The analyst said he expects Bragg’s core portfolio of games to be live across each major US state and operator by mid 2023, as the company rolls out its proprietary and exclusive content. 

On guidance, management offered in its Q3 comments 2023 EBITDA outlook of over 20 per cent growth, but Engel sees that as conservative.

“Given management’s history of exceeding guidance, we view EBITDA expectations as highly achievable and don’t believe shares will trade below 5x as BRAG reports at/above targets. 2023 guidance also includes limited U.S. share gains, which can offer upside to growth in 2H23,” Engel wrote.

For his part, Engel is forecasting fourth quarter revenue and EBITDA of €18.9 million and €2.3 million, respectively, for 2022 totals of €80.0 million and €10.6 million, respectively. For 2023, he is calling for €90.3 million in revenue and €3.3 million in EBITDA.

“BRAG is an under-covered micro-cap gaming stock; however, its US$66 million enterprise value isn’t reflective of the size of the business. With just six per cent of 3Q revenue from North America, we believe BRAG can catch the attention of U.S./Canada gaming investors as it ramps U.S. market share in 2023 and beyond. We tweak estimates slightly lower to reflect guidance but see potential for additional beats/raises,” Engel said.