Digital iGaming Expansion Will Unlock Immersive Opportunities While Risks Persist

Key Takeaways

• The company's digital expansion, aggregator partnerships, and new gaming verticals position it for accelerating high-margin revenue growth beyond analyst expectations.
  
• Evolving regulation and increased digital adoption are set to drive sustained structural growth and recurring revenues across both domestic and international markets.
  
• Heavy reliance on traditional markets and physical gaming exposes the company to regulatory, demographic, and digital disruption risks that threaten future growth and profitability.

Catalysts

A gaming technology company, supplies content, platform, and other products and services to online and land-based regulated lottery, betting, and gaming operators in the United Kingdom, Greece, and internationally.

• While analyst consensus highlights Inspired Entertainment's digital expansion, this may drastically underestimate the Interactive segment's potential, as iGaming's US penetration is below 10 percent of the population-yet where legalized, iGaming generates four to five times the revenue of sports betting, suggesting exponential long-term revenue growth as the regulatory landscape evolves in the US and internationally.
  
• Analysts broadly agree that margin expansion will accrue from the mix shift toward digital and the sale of legacy assets, but the digital business' combination of low capital intensity, rapid product rollout, and demonstrated ability to scale recurring high-margin revenue makes it likely Inspired will comfortably exceed its 40 percent EBITDA margin target, driving substantially higher long-term cash flow and net income growth than currently expected.
  
• Inspired is positioned to unlock a network effect through aggregator partnerships and bespoke content, which are expanding its reach into previously inaccessible markets and operators; this deeper content and distribution integration fuels accelerating revenue growth with little incremental cost, measurably improving both scale and profit conversion over time.
  
• The company's early success in new, high-growth and underpenetrated verticals such as hybrid dealer games and lottery integrations is largely overlooked-these verticals tap unaddressed digital demand, supporting a new wave of multi-year revenue acceleration and high-margin expansion as consumer behaviors shift further toward immersive, omnichannel experiences.
  
• Inspired's ability to capitalize on the accelerating digitalization and cultural normalization of gambling is poised to create a sustained structural tailwind; as more jurisdictions embrace both land-based and online gaming, recurring revenues and wallet share will scale well beyond current estimates, structurally lifting top-line growth, EBITDA, and enterprise value for years to come.

Inspired Entertainment Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Inspired Entertainment compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Inspired Entertainment's revenue will grow by 4.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 20.6% today to 7.5% in 3 years time.
• The bullish analysts expect earnings to reach $25.4 million (and earnings per share of $0.79) by about September 2028, down from $61.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 29.9x on those 2028 earnings, up from 4.0x today. This future PE is greater than the current PE for the US Hospitality industry at 23.9x.
• Analysts expect the number of shares outstanding to grow by 1.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Inspired Entertainment Future Earnings Per Share Growth

Risks

• Inspired Entertainment remains heavily reliant on the United Kingdom and European markets for much of its gaming and digital revenues, exposing the company to volatility from region-specific regulatory tightening and economic downturns, which could cause unpredictable swings in both revenues and earnings.
  
• The company continues to emphasize its legacy physical gaming products and cabinets, such as the Vantage cabinet, in markets like the U.K., Greece, and Canada, despite long-term consumer trends shifting towards online and mobile-first channels; this leaves Inspired at risk of shrinking demand for its most capital-intensive offerings and could compress its future net margins if digital growth fails to offset physical declines.
  
• Management highlights continued investment in new digital content and product innovation, but also notes that some offerings, such as the 4-ball roulette game, are performing below expectations, underscoring the risk that inconsistent product success or failure to keep pace with larger, better-funded rivals could lead to market share loss and stagnating revenue growth.
  
• There is a persistent risk from growing regulatory and political scrutiny of gambling globally, which could result in stricter compliance requirements, higher taxation, or outright bans in key jurisdictions, directly reducing the company's total addressable market and increasing costs, potentially weighing on EBITDA and overall earnings.
  
• The broader hospitality sector-including high-frequency venues such as casinos, pubs, and betting shops-faces long-term pressure from demographic changes and the rise of remote entertainment, which threatens Inspired's core customer base for both gaming and leisure segments and could lead to long-term revenue attrition as physical foot traffic declines.

Valuation

• The assumed bullish price target for Inspired Entertainment is $19.83, which represents two standard deviations above the consensus price target of $13.33. This valuation is based on what can be assumed as the expectations of Inspired Entertainment's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $339.1 million, earnings will come to $25.4 million, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 12.3%.
• Given the current share price of $9.29, the bullish analyst price target of $19.83 is 53.2% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• 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.