Enthusiast Gaming has a 483 per cent upside, says Haywood

Enthusiast Gaming (Enthusiast Gaming Stock Quote, Charts, News, Analysts, Financials TSX:EGLX) is strengthening its position as the top gaming property in the US, according to a new report from Haywood Capital Markets. 

A gaming media and entertainment company, Enthusiast Gaming connects marketers with video game and esports fans through its platform involving digital media, content and gaming assets. The company announced on Monday that it was again ranked as the number one gaming property for unique visitor traffic in the US, according to Comscore data for May 2023, achieving a record 56 million unique visitors for a 28 per cent year-over-year growth rate.

“By every measure, gaming has entered the digital media mainstream, and Enthusiast Gaming has become the undisputed category leader,” said Enthusiast CEO Nick Brien in a press release. “With the leading independent gaming platform, Enthusiast Gaming enables brands to engage, not just access, this passionate and hard-to-reach demographic.”

Next in line after Enthusiast on the Comscore list was Twitch at 48.7 million unique visitors, followed by Roblox.com at 43.9 million and Take 2 Interactive at 32 million.

Looking at the data, Haywood analyst Gianluca Tucci said Enthusiast has actually widened its lead on the Twitch and Roblox and that EGLX rose to 72 on Comscore’s Top 100 Properties list in the US for all digital media categories.

“We view the May 2023 Comscore ranking as very encouraging and continued evidence of a robust user base to monetize and leverage, illustrating strategic intrinsic value of its platform,” Tucci wrote in his July 10 report.

Tucci said Enthusiast has been reporting solid growth from its existing customers and the company expects margin growth to continue to outpace revenue growth, where gross profit has grown year-over-year by 97 per cent, 64 per cent, 32 per cent and 24 per cent over quarters Q2 2022, Q3 2022, Q4 2022 and Q1 2023, respectively.

On valuation, Tucci has estimated EGLX to be currently trading at 0.5x his 2023 EV/Revenue estimate versus its Advertising & Marketing peer group average at 4.1x and its Gaming Publisher/Developer peer average of 3.7x. 

“EGLX has been illustrating successful, deepened monetization of its viewership base while not receiving the associated valuation lift due to pressures in the ad-market and some concern around its balance sheet – we believe the equity would be trading more constructively in a normalized ad environment and the fruits of new CEO Nick Brien’s optimization efforts would be more apparent – to this end we expect EGLX to make more ‘noise’ towards 2024,” Tucci wrote.

With the update, Tucci reiterated a “Buy” rating and $3.50 target on Enthusiast Gaming, implying at press time a 12-month projected return of 483 per cent.