GAN Lands Stock Higher Price Target as Analyst Raves About Q2 iGaming Numbers

Posted on: July 21, 2020, 12:08h. 

Last updated on: July 21, 2020, 12:59h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of GAN Ltd. (NASDAQ:GAN) are soaring Tuesday after Macquarie gaming and leisure analyst Chad Beynon reiterated an outperform rating on the gaming software maker. He also lifted his price forecast on the stock to $29 from $24.

GAN Shares Soar On Analyst Call
GAN CEO Dermot Smurfit seen here celebrating the company’s US IPO. An analyst calls the stock a top iGaming pick. (Image: RTE)

GAN stock debuted in New York in early May via an initial public offering (IPO) priced at $8.50 a share. Since then, the shares have tripled, as analysts and investors fawn over the expansion of online casinos in the US. A strong second-quarter showing in the marquee internet gaming markets of New Jersey and Pennsylvania is one reason behind Beynon’s bullishness on GAN.

In our view, the 2Q iGaming performance is a positive read-through to GAN, as its partners in NJ and PA continue to perform well,” said the analyst. “As such, we are raising our estimates for GAN and now expect 2Q revs and earnings before interest, taxes, depreciation and amortization (EBITDA) of $9.1 million and $1.9 million, respectively.”

Beynon’s revenue and EBITDA forecasts on GAN are six percent and 12 percent, respectively, above the Wall Street consensus.

Plenty of Catalysts

UK-based GAN derives more than 80 percent of its turnover in the US and has clients in Indiana, New Jersey, and Pennsylvania. Additionally, the company is looking to tap into new markets, including Illinois, Michigan, and Tennessee, among others.

That is to say GAN stock is a play on the expansion of internet casinos and sports wagering, scenarios analysts widely expect will occur as more states look to plug revenue gaps created by the coronavirus economic shutdown. On Monday, Morgan Stanley said it expects the US iGaming/Sports betting market will generate $12 billion in turnover in 2025, up from just $1.5 billion last year.

Beynon points out that more states wading into online casinos and/or sports betting is a credible growth catalyst for GAN.

“The company also has multiple catalysts, including legalization of new states, ramp of existing states/contracts, and partnership announcements,” said the analyst.

He said GAN is his top iGaming pick, citing the company’s “hyper-growth, operating leverage, and clean balance sheet.”

Near-Term Excitement?

Last month, GAN teased investors with news that it could soon reveal what it called a “Tier-1” client that could account for $300 million to $400 million in annual revenue. The client announcement isn’t yet official, but it does amount to GAN stealing business from an established rival.

There’s internet chatter speculating that the mystery client is Churchill Downs (NASDAQ:CHDN). If that proves true, it would mean GAN is pilfering business from SBTech, a unit of DraftKings (NASDAQ:DKNG).

Beynon’s $29 price target on GAN implies upside of 17.7 percent from the Monday close and is slightly higher than the Wall Street consensus of $28.50. Three analysts cover the stock, all with the equivalent of “very bullish” ratings.