Growth In Latin America And Europe Will Ignite Digital Entertainment

Key Takeaways

• Strong growth and strategic expansion in regulated and emerging markets support future revenue opportunities and broader user acquisition.
  
• Ongoing investment in technology and sustainability initiatives enhances operational efficiency, regulatory compliance, and long-term earnings stability.
  
• Growing exposure to stricter regulations, rising costs, slowing regional growth, and acquisition risks threaten Betsson's profitability and increase earnings volatility in the face of stiffening competition.

Catalysts

Through its subsidiaries, invests in and manages online gaming business in the Nordic countries, Latin America, Western Europe, Central and Eastern Europe, Central Asia, and internationally.

• Betsson's continued strong growth in Latin America and Western Europe, particularly with record revenues in Peru, Argentina, and Italy, highlights its ability to capitalize on broader adoption of online entertainment and gaming, supporting future revenue expansion as these markets digitize further.
  
• Expansion and launches of Betsson's flagship brand in new regulated markets (e.g., Georgia, Lithuania) and targeted acquisitions, particularly in regions undergoing regulatory liberalization, position the company to capture new user bases and drive top-line growth.
  
• Significant ongoing investments in proprietary technology (Techsson platform and native apps) enhance product innovation, operational flexibility, and customer experience, likely to improve net margins through efficiency and stronger customer retention over time.
  
• Enhanced focus on sustainability, responsible gaming, and obtaining ISO certifications strengthens Betsson's standing with regulators and customers, which, amid tightening compliance standards, should help consolidate regulated market share and stabilize long-term earnings.
  
• Betsson's robust balance sheet and cash position enable continued investments in technology, marketing, and M&A, which, alongside increasing digital payment adoption and evolving gaming formats (live betting, eSports), provide catalysts for sustained revenue and earnings growth.

Betsson Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Betsson's revenue will grow by 6.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 16.2% today to 20.1% in 3 years time.
• Analysts expect earnings to reach €290.0 million (and earnings per share of €1.94) by about August 2028, up from €191.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.3x on those 2028 earnings, down from 10.5x today. This future PE is lower than the current PE for the GB Hospitality industry at 14.6x.
• Analysts expect the number of shares outstanding to grow by 0.42% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.58%, as per the Simply Wall St company report.

Betsson Future Earnings Per Share Growth

Risks

• The increasing shift of revenue toward locally regulated markets (66% of total revenue, up from 55%) is leading to significantly higher gaming tax burdens, which has already reduced gross and EBIT margins and is likely to continue impacting profitability and net margins over time, especially as more countries tighten their regulatory and tax frameworks.
  
• The company has experienced substantial increases in operational expenses, particularly personnel costs (up 20% year-on-year and currently outpacing revenue growth) due to acquisitions and expansion, which could erode margins if further growth does not sufficiently outstrip cost inflation or if cost control deteriorates.
  
• Revenue growth in some core regions appears to be slowing or declining, exemplified by a 28% drop in the Nordics and sequential softness or stagnation in B2B and some CEECA markets, indicating vulnerability to regional market shifts and the risk of uneven, less predictable long-term revenue expansion.
  
• Betsson's M&A-driven expansion strategy carries integration risk, as seen in the recent failed acquisition in the Netherlands, and exposes the company to overextension or missteps in new and uncertain regulatory environments (e.g., Brazil), potentially affecting future earnings stability and return on investment.
  
• The transition toward higher marketing spends to drive scale (with B2C marketing and affiliate costs at 22% of B2C revenue) and intensified international competition, particularly in newly regulated and high-growth markets, may compress industry margins further and increase the pressure on Betsson's future revenues and net profit growth.

Valuation

• The analysts have a consensus price target of SEK178.333 for Betsson based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK200.0, and the most bearish reporting a price target of just SEK150.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.4 billion, earnings will come to €290.0 million, and it would be trading on a PE ratio of 9.3x, assuming you use a discount rate of 6.6%.
• Given the current share price of SEK162.0, the analyst price target of SEK178.33 is 9.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.