GVC Could Be Winning Wager Among Sports Betting Stocks, Says Deutsche Bank Analyst

Posted on: July 7, 2020, 09:45h. 

Last updated on: July 8, 2020, 12:21h.

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

GVC Holdings Plc is the latest British bookmaker to garner praise from a sell-side research firm, with Deutsche Bank saying the company’s coming update could be better than expected.

GVC Holdings Wins Analyst Praise
Ladbrokes owner GVC could post better-than-expected first half results, says one analyst. (Image: The Sun)

GVC — which partners with MGM Resorts International (MGM) on the ROAR Digital sports betting application — grappled mightily with the effects of the coronavirus shutdown. Earlier this year, the operator was forced to shutter its UK-based retail betting shops, as major athletic competitions and leagues were canceled or postponed throughout Europe. That forced the company to issue a glum profit warning in March.

Deutsche Bank analyst Simon Davies forecasts GVC will generate earnings of $384.44 million for the first six months of 2020 while noting the operator delivers a “positive trading update” next week.

If the Coral and Ladbrokes owner is able to surprise investors with a stronger-than-expected first half report, it would join rival William Hill in confirming results perked up in the second quarter, as some sports offerings returned.

Offsetting Lost Sports Revenue

Davies acknowledges that the COVID-19 shutdown will likely prove to be “a significant drag” on GVC’s first half results. But the analyst points to a familiar segment as augmenting some of the operator’s lost revenue and earnings: online casinos.

As is the case with several of its UK-based and American rivals, GVC has exposure to the rapidly growing internet gaming market — a niche analysts on both sides of the pond are fawning over. Some gaming companies that offer both iGaming and sports betting are benefiting, as gamblers hungry for sports opt for online casinos while waiting for normal sports calendars to return.

Without getting into particulars, Davies forecasts “spectacular growth” by GVC’s online casinos’ segment in the first six months of the year. The analysts estimate the operator’s revenue for that period will decline 12 percent to $1.99 billion. But that drop could have been more severe if not for iGaming.

The consensus estimate calls for GVC to post 2020 earnings of almost $814 million. But Davies sees that number being easily topped. The analyst sees the company earning north of $880 million this year.

US Opportunities

An account of Davies’ assessment of GVC in The Times doesn’t mention the company’s US footprint. That’s something analysts have recently been quick to mention when lauding rivals Flutter Entertainment (OTC:PDYPY) and William Hill (OTC:WIMHY).

Still, GVC does have some exposure to the fast-growing US sports wagering market. Last month, ROAR Digital inked a deal to become the exclusive sports betting partner of the Confederated Tribes of Grand Ronde of Oregon.

That deal was announced less than two months after ROAR got the green light to launch in Colorado, which is expected to be a lucrative market when the sports slate returns to normal. In January, ROAR debuted in West Virginia.