Esports Leading The Way In Online Gaming (NASDAQ:GMBL)


Esports Entertainment (GMBL)

Newly-public Esports Entertainment (GMBL) offers the most versatile and transparent wagering platform in the $3.6 billion online gaming market. We initiate coverage with a Buy long-term rating and a $7.00 price target.

52-Week Range

$2.40 – 9.75

Total Debt (million)

$0

Shares Outstanding

11.2 million

Total Debt/Equity

0%

Insider/Institutional

5.6% / 1.04%

ROE (TTM)

NM%

Public Float

7.2 million

Book Value/Share

$1.01

Market Capitalization

$54.6 million

Daily Volume (90-day avg)

367.4k

FYE June

2020A

2021E

2022E

EPS($)

ACTUAL

CURRENT

PREVIOUS

CURRENT

PREVIOUS

Q1 Sept

$(0.22) E

$(0.09) E

Q2 Dec

(0.13) E

(0.07) E

Q3 March

(0.08) E

(0.06) E

Q4 June

(0.05) E

(0.02) E

Year*

$(1.50) A

$(0.48) E

$(0.24) E

FYE June

2020A

2021E

2022E

Revenue ($ mil.)

ACTUAL

CURRENT

PREVIOUS

CURRENT

PREVIOUS

Q1 Sept

$0.30 E

$5.0E

Q2 Dec

2.5 E

6.0E

Q3 March

4.5 E

6.5E

Q4 June

5.7 E

7.5E

Year

$0.0A

$13.0E

$25.0E

Change

92%

  • Numbers may not add up due to rounding.

Investment Thesis

  • The esports fan base is expanding rapidly and expected to reach 590 million by 2022; global gross revenues are estimated at $3.6 billion.
  • The company added UK and Irish gambling licenses through a July acquisition and acquired its first US license in August through a partnership with a New Jersey casino operator.
  • Esports Entertainment has nearly $12 million of cash to fund acquisitions, platform development and tournament hosting. Management is guiding for FY:21 revenues of $13 million.
  • We initiate coverage with a Buy Long-term rating and a $7.00 price target, which assigns a six-times multiple to FY:21 projected revenues.

Risks

  • The company has accumulated net losses and may be years away from generating operating profits on a consistent basis.

INVESTMENT THESIS

Esports Entertainment Group is an emerging leader in the rapidly expanding multi-billion-dollar market for online gambling and esports wagering. Esports is a relatively new segment of online gambling consisting of competitive video game playing by individuals and/or teams for cash prizes. The company has developed an innovative wagering platform that offers betting enthusiasts better odds and greater transparency in a secure, online environment and added a best-in-class customer loyalty program through its July acquisition of Argyll Entertainment. Esports Entertainment already was able to accept online wagers from fans in Canada, Japan, Germany and South Africa and recently secured a Malta gaming license that extends its reach into nearly 150 jurisdictions, including a number of European Union member countries.

The Argyll Entertainment acquisition also provided Esports Entertainment with UK and Ireland gambling licenses and some 200,000 registered online players. A gambling license in New Jersey has been secured via the…



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