Gambling.com Hits The Jackpot With Breakout, Increasing Revenue

Key Points

• Gambling.com Group's stock rallied nearly 6% in June following a breakout from a first-stage base.
• The company's first-quarter results showed a 42% increase in earnings and a 36% increase in revenue year-over-year.
• Revenue growth has been consistently strong, with double- or triple-digit rates in seven of the past eight quarters.
• Despite a decline in earnings in the past two years, analysts expect growth to rebound in the current year.
• Gambling.com Group raised its full-year revenue guidance to a range of $95 million to $99 million.
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Investors in Gambling.com Group Limited NASDAQ: GAMB got lucky in early June when the stock broke out of a sloppy first-stage base and went on to rally nearly 6% in the subsequent sessions.

The base is considered first-stage because it undercut its previous structure low on May 3, when it retreated to a session low of $8.50 before rebounding. 

While that kind of price action is frustrating to investors who hold any stock, a pullback often shakes out some investors or swing traders who don’t want to hold for the long term. That clears the deck for new investors with conviction about the stock’s prospects to nab shares at a lower valuation. 

Gambling.com went public in July 2021. It’s in that sweet spot where young stocks can notch big gains due to excitement and optimism surrounding a new company, potential for rapid growth, and limited supply of available shares in the market.

Helping Online Casinos Acquire Players

Gambling.com Group is a media company that does not offer actual gambling services but instead helps online sportsbooks and casino operators acquire players. It publishes informational portals that offer comparisons and reviews of regulated online gambling Web sites around the world. 

It generates revenue by referring online gamblers to regulated online gambling Web sites. It operates more than 50 different Web portals which publish independent reviews of online sportsbooks and online casinos.

In addition to the referrals, Gambling.com also generates revenue through advertising and onboarding fees paid by online gambling operators. Since its 2022 acquisition of RotoSports, the company generates a portion of its revenue from data subscriptions and data syndication, whereby a customer subscribes to services over a period of time.

Earnings And Revenue Up In Q1

The company released first-quarter results on May 18. Gambling.com earned $0.17 a share on revenue of $26.7 million, up 42% and 36%, respectively, year-over-year. 

Revenue grew at double- or triple-digit rates in seven of the past eight quarters. The company has been profitable since 2020, which was a banner year as plenty of people were at home with money to spend. Earnings declined in the next two years, but analysts expect earnings growth to return this year. 

Wall Street is betting on a 239% earnings increase to $0.65 a share. Next year that’s seen rising another 33% to $0.86 a share. 

Boosted 2023 Outlook

Gambling.com raised its own full-year guidance. It now expects revenue in a range between $95 million and $99 million. It sees earnings before interest, taxes, depreciation, and amortization coming in between $33 million to $37 million. 

In a note to shareholders in the most recent annual report, CEO Charles Gillespie wrote, “My north star for the Group is organic growth, meaning growth excluding the effects of acquisitions. This is the clearest and most direct way for us to create shareholder value and increase earnings per share.” 

He added that the company had invested significantly in its technology stack, content and domain names, saying that expectations for organic growth from these investments are high.

One clear path toward increased organic growth is continued launches of Web sites geared toward sports betting in specific U.S. states. For example, as sports betting was recently legalized in Ohio and Massachusetts, Gambling.com rolled out content for those markets. 

Consensus View Of "Buy"

Gambling.com Group analyst ratings show a consensus view of “buy” on the stock, with a price target of $13.50, representing an upside of 20.32%.

That’s good to see, but keep in mind: With a market capitalization of just $396.8 million and with only 9.2 million shares in the float, this stock simply won’t attract much analyst attention or institutional investment. The big institutions like liquidity and a longer track record of earnings stability, which isn’t the case yet, with this stock. 

A lack of analyst attention can be good for individual investors, though, as there can be mispricings due to scant information and scrutiny from big investors. You can catch a glimpse of possible mispricings in the wide bid-ask spreads on some trading days. In addition, a lack of liquidity can also result in discrepancies between buyers and sellers who can’t quite agree on a stock’s valuation. 

Gambling.com is currently extended from its most recent buy point, but a pullback with support at a short-term moving average, such as the 10-day or 21-day, could offer a new buy opportunity.