The New Odds Feed+ Product And Expansion Into Brazil Will Secure Future Opportunities

Key Takeaways

• New product offerings and strategic partnerships could drive revenue growth and improve retention in expanding markets like Brazil.
  
• Operational efficiency and strategic acquisitions are expected to boost net margins and secure future revenue streams.
  
• Departure of key clients and reliance on major markets pose risks to revenue stability, while new market regulations and share buybacks could affect growth and margins.

Catalysts

Operates as an independent provider of sports betting technology and services to the betting and gaming industry in Europe, the Americas, and internationally.

• Kambi's new Odds Feed+ product and modular services have shown potential to increase the company's addressable market and retain partners that might have otherwise left, leading to potential revenue growth.
  
• The expansion into the Brazilian market with new partnerships, combined with regulatory changes set for January, is anticipated to drive future revenue growth in a region with high industry expectations.
  
• Kambi is focused on increasing operational efficiencies, which, alongside their modernization strategy, could improve net margins as they aim to reduce costs and work smarter.
  
• The long-term contract extension with partners like Rush Street Interactive, and the acquisition of new fast-growing brands like KTO, are set to secure and boost future revenue streams.
  
• The implementation of a €12 million share buyback program reflects confidence in future cash flows and could positively impact EPS if the company continues to maintain a strong balance sheet.

Kambi Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kambi Group's revenue will grow by 4.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 9.0% today to 8.9% in 3 years time.
• Analysts expect earnings to reach €17.8 million (and earnings per share of €0.61) by about February 2028, up from €15.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €25.1 million in earnings, and the most bearish expecting €10.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.8x on those 2028 earnings, up from 19.2x today. This future PE is greater than the current PE for the SE Hospitality industry at 12.8x.
• Analysts expect the number of shares outstanding to decline by 2.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.23%, as per the Simply Wall St company report.

Kambi Group Future Earnings Per Share Growth

Risks

• The departure of important clients such as Kindred Group and LeoVegas from Kambi's turnkey sportsbook could reduce future revenue streams due to decreased client dependency.
  
• The regulatory environment in new markets like Brazil presents both opportunities and risks; the transition from a grey market could lead to increased competition, impacting pricing strategies and revenue margins.
  
• Non-recurring revenue items and the cessation of certain fees, such as the Penn transition fees, contribute to a potentially misleading comparison of revenue growth, affecting perceived long-term earnings stability.
  
• The heavy reliance on a few significant markets and clients, despite ongoing efforts to diversify, poses a risk to maintaining stable revenue margins in the long term if market conditions or contracts change.
  
• The introduction of a new share buyback program, while reflecting confidence, diverts cash from reinvestment opportunities that could drive future growth, potentially affecting net margins if not offset by increased revenue.

Valuation

• The analysts have a consensus price target of SEK179.861 for Kambi Group 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 SEK237.33, and the most bearish reporting a price target of just SEK116.26.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €199.8 million, earnings will come to €17.8 million, and it would be trading on a PE ratio of 29.8x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of SEK117.3, the analyst price target of SEK179.86 is 34.8% 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.