GAN Defended by Analysts Following Post-Earnings Plunge

Posted on: August 17, 2021, 11:13h. 

Last updated on: August 17, 2021, 03:31h.

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

GAN Ltd. (NASDAQ:GAN) stock is being taken to the woodshed today. That’s after the gaming technology provider’s second-quarter earnings per share missed Wall Street estimates.

GAN stock
People walk in front of the Nasdaq market site where GAN is tumbling today. Analysts still like the stock. (Image: Bloomberg)

After the close of US markets Monday, GAN said it lost seven cents a share in the June quarter. Analysts expected a loss of just a penny a share. That sent the shares tumbling in yesterday’s after-hours session, and that’s carrying over to today, with the stock down more than 18 percent in midday trading. Struggling to stay above $13, GAN stock resides at its lowest levels since last October.

While GAN stock is getting drubbed and needs to more than double to reclaim its prior high of $31.81, analysts are sticking by the name.

Post GAN’s earnings call, our estimate visibility for the remainder of the year strengthens, and upside from both its business-to-business and international business-to-consumer divisions are more pronounced, in our view,” said B. Riley analyst David Bain in a note to clients today.

Bain rates GAN “buy,” with a $26 price target.

Hope for GAN Stock

Last month, GAN boosted its earnings before interest, taxes, depreciation and amortization (EBITDA), and revenue guidance for the second quarter, as well as its full-year sales forecast.

That update may be part of the reason the stock is sliding today because, over the course of this earnings season, multiple gaming companies that previously lifted full-year sales projections did so again in earnings statements. GAN merely affirmed guidance. Still, analysts argue there are some favorable points are being overlooked.

“While not a subject on its earnings call, we note WYNN iGaming share in Michigan, powered by GAN, was up 29 percent month-over-month in July,” adds Bain. “In terms of new clients, GAN suggested multiple advanced stage discussions with several potential new customers, and it expects significant customer penetration from its SuperRGS.”

Some Catalysts for GAN Rebound

For investors, GAN may appear to be a falling knife. But Macquarie’s Chad Beynon notes it trades at 4.2x estimated 2022 sales compared to 7x for its peers, implying GAN is discounted relative to rivals.

Beynon adds that a recent flurry of consolidation activity in the iGaming and sports betting industry could “shine a light on GAN’s platform value.” He rates the stock “outperform” with a $25 price target.

GAN could also get a boost from upcoming online casino launches in new markets, including Ontario, Canada, which alone could be a $5 billion market. Then there is the start of football season in a few weeks and sports betting launches coming up in Arizona, Connecticut, Louisiana, and Wyoming, among others. Those act as expanders for GAN’s total addressable market. Beynon sees other reasons to keep an eye on the stock.

“In addition, GAN’s business (and investment pitch) has been supported by its iBridge patent, which allows for retail and mobile connections. This has helped lead to patent revenues with a few major US players. That said, it continues to appear that many of the omnichannel players are linking their customers’ accounts without the use of what we thought was a critical piece for GAN,” said the analyst.