Online Regulatory Risk Will Stunt Expansion But Opportunity Emerges

Key Takeaways

• Growth prospects hinge on global online gambling legalization, but regulatory risk and reliance on key partners threaten long-term expansion and margins.
  
• Diversification into new marketing and subscription channels shows promise, yet higher acquisition costs and macroeconomic headwinds could dampen future earnings.
  
• Dependence on search visibility, challenged by evolving algorithms and regulations, forces costlier diversification and threatens both topline growth and long-term margin stability.

Catalysts

Operates as a performance marketing company for the online gambling industry in North America, the United Kingdom, Ireland, rest of Europe, and internationally.

• Although the expansion and legalization of online gambling across North America and globally remains a strong long-term growth opportunity that should increase the company's addressable market and drive future revenues, Gambling.com Group faces sustained risk from heightened regulatory scrutiny and potential tightening of gambling laws, which may constrain their ability to fully exploit these new markets and weigh on long-term topline growth.
  
• While the group's investments in diversifying digital marketing channels beyond traditional SEO-such as ramping up apps, e-mail, social media, and paid media-are showing early promise and have begun to contribute meaningful additional revenue streams, these newer channels come with higher acquisition costs that could structurally dampen adjusted EBITDA margins and net earnings relative to those historically delivered by SEO-led business.
  
• Even as the business is successfully growing high-margin, recurring subscription revenue in its sports data services segment-now accounting for a quarter of total revenue and showing robust demand-persistent macroeconomic uncertainty or a downturn could depress discretionary consumer spending on betting activities and indirectly limit upsell opportunities, potentially slowing segment revenue growth rates.
  
• Despite further geographic and vertical diversification through acquisitions like Spotlight.Vegas and ongoing U.S. state launches (such as Missouri), Gambling.com Group continues to rely heavily on a handful of major operator relationships and faces the risk of revenue or margin pressure if these partners renegotiate terms, exit certain markets, or build their own direct user acquisition funnels.
  
• While the rising shift of younger, digitally-native demographics toward regulated online gambling and discovery platforms is a supportive secular backdrop for future traffic and monetization, the proliferation of emerging digital marketing channels (for example, influencer marketing and direct app engagement) may further fragment acquisition strategies and dilute the competitive advantage traditionally held by scaled SEO-based affiliates, putting long-term market share and top-line expansion at risk.

Gambling.com Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Gambling.com Group compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Gambling.com Group's revenue will grow by 15.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 9.7% today to 23.5% in 3 years time.
• The bearish analysts expect earnings to reach $52.7 million (and earnings per share of $1.46) by about August 2028, up from $14.3 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 bearish analyst cohort, the company would need to trade at a PE ratio of 9.6x on those 2028 earnings, down from 21.6x today. This future PE is lower than the current PE for the US Media industry at 20.5x.
• Analysts expect the number of shares outstanding to grow by 1.81% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.68%, as per the Simply Wall St company report.

Gambling.com Group Future Earnings Per Share Growth

Risks

• Gambling.com Group's revenue growth remains highly dependent on search engine visibility, and recent Google algorithm changes have directly reduced search-driven revenue and forced a faster pivot to lower-margin channels, increasing the risk of longer-lasting top-line slowdowns and sustained margin compression.
  
• Ongoing industry shifts toward AI-powered search and generative AI tools reduce the number of available top-ranking positions and diminish organic site traffic, threatening Gambling.com Group's ability to maintain its historic advantage in acquiring high-intent users, which could structurally impact future revenue and operating margins.
  
• The company's investment in new marketing channels like apps, email, and paid media, while growing, require higher upfront costs and deliver structurally lower gross margins compared to traditional SEO, potentially driving a less favorable profitability profile even as revenue diversifies.
  
• Expansion into adjacent verticals such as ticketing (Spotlight.Vegas) introduces operational complexity and dependency on cyclical sectors like Las Vegas tourism, so a prolonged downturn in travel or live events could limit the contribution of this acquisition to earnings and stall revenue diversification efforts.
  
• Gambling.com Group continues to face underlying risks from evolving regulatory regimes, state-specific market restrictions, and ongoing societal scrutiny over gambling, all of which could lead to tighter compliance requirements and greater limitations on affiliate marketing, thereby negatively impacting revenue growth and long-term earnings prospects.

Valuation

• The assumed bearish price target for Gambling.com Group is $11.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Gambling.com Group's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $224.6 million, earnings will come to $52.7 million, and it would be trading on a PE ratio of 9.6x, assuming you use a discount rate of 7.7%.
• Given the current share price of $8.64, the bearish analyst price target of $11.0 is 21.5% 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.