International Expansion And Acquisitions Will Expand Market Presence In The iGaming Industry

Key Takeaways

• Strategic acquisitions and market penetration in regulated regions bolster revenue growth and extend market presence globally.
  
• Capital allocation, including share repurchases, aims to boost earnings per share and enhance shareholder value.
  
• Slower North American growth, acquisition integration challenges, Google policy uncertainties, M&A risks, and international regulatory hurdles may impact revenue and profitability.

Catalysts

Operates as a performance marketing company for the online gambling industry worldwide.

• The Gambling.com Group's focus on organic growth in iGaming across regulated markets and its ability to gain market share with industry-leading capital efficiency are expected to continue driving revenue growth.
  
• The company’s exposure to the ongoing regulation of both iGaming and online sports betting in the U.S., such as the recent approval in Missouri, is likely to facilitate future revenue growth and margin improvement as these markets mature.
  
• Gambling.com Group’s strategy of targeted acquisitions, exemplified by the successful integration and performance improvement of Freebets.com, is poised to further enhance revenue and extend market reach.
  
• The company's commitment to international expansion in existing and new markets sets the stage for continued global revenue growth.
  
• Planned share repurchases and capital allocation strategies are anticipated to enhance earnings per share (EPS) and potentially improve shareholder value over time.

Gambling.com Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gambling.com Group's revenue will grow by 17.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 23.4% today to 25.3% in 3 years time.
• Analysts expect earnings to reach $51.3 million (and earnings per share of $1.27) by about December 2027, up from $29.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $44.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.9x on those 2027 earnings, down from 19.2x today. This future PE is greater than the current PE for the US Media industry at 14.7x.
• Analysts expect the number of shares outstanding to grow by 4.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.95%, as per the Simply Wall St company report.

Gambling.com Group Future Earnings Per Share Growth

Risks

• The slower growth in North America's iGaming revenue, along with flat performance in North American sports betting due to challenging comparisons to prior years, could impact overall revenue growth for the company.
  
• The integration of acquisitions such as Freebets.com, while progressing positively, started from a low base, suggesting challenges in rapidly increasing organic growth and market share, which could affect revenue generation and net margins.
  
• Google’s policy changes, although not as disruptive as initially feared, still present uncertainties in organic search and media partnerships that could potentially impact top-line revenue if similar changes occur in the future.
  
• The variable success and timing of M&A deals, particularly in a buyer's market, introduce risks in scaling operations effectively and integrating acquisitions, which could affect earnings and capital efficiency.
  
• International expansion into new markets carries execution risks and could be impacted by slower regulatory changes in regions like Brazil and uncertainties regarding future legal frameworks, potentially affecting revenue growth and profitability.

Valuation

• The analysts have a consensus price target of $17.71 for Gambling.com 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 $20.0, and the most bearish reporting a price target of just $16.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $202.5 million, earnings will come to $51.3 million, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 6.9%.
• Given the current share price of $15.95, the analyst's price target of $17.71 is 10.0% 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.