Shares of Score Media and Gaming Inc. (SCR-T) slipped 6 per cent on Thursday following an earnings miss for its fourth quarter.
Shares of the Toronto-based digital media and sports betting company were down 5 cents to 74 cents in early trading. The stock, which recently graduated to the Toronto Stock Exchange, has traded between a 52-week high of $1.06 in June and a low of 28 cents in March.
The company reported revenue of $2.5-million for the quarter ended Aug. 31 compared to $6.4-million for the same time last year and below analyst expectations of $4-million.
Its EBITDA (earnings before interest, taxes, depreciation and amortization) loss was $8.3-million versus a loss of $4.1-million a year ago and compared to expectations of a loss of $7.2-million.
Its net loss was $12.7-million or 4 cents per share versus a loss of $4.8-million or a penny per share a year ago.
Eight Capital analysts Suthan Sukumar said in a note the results are down from a year ago as a result of the limited sports calendar from COVID-19 lockdowns during most of the quarter.
“As such, we see the results as a non-event and instead focus on operating trends post the quarter which highlight an impressive snapback in the business,” he wrote, citing record ad sales on the media app in Sept. and a more than 500-per-cent year-over-year growth on the betting platform, “(albeit on a smaller base) reflecting pent-up demand from bettors, with trends extending into October.”
Mr. Sukumar, who has a “buy” and $1.25 target price on the stock, believes the company is “well-positioned for execution and share gains in the burgeoning U.S. sports betting market as it embarks on a multi-state rollout, leveraging its differentiated media [and] betting strategy.”
He also sees additional market launches and new partnerships, “which would serve to expand the company’s addressable market opportunity in the US, as key near-term catalysts.”
Score Media is behind theScore media app offering live scores, news and sports stats and theScore Bet sports betting app currently available in New Jersey, Colorado, and Indiana.
The company’s pending launch of an online casino will also offer “further upside to the story,” Mr. Sukumar wrote.
In a conference call after markets closed on Wednesday, Score Media chief executive officer John Levy said fiscal 2020 was “significantly impacted by the cancellation or postponement of major sports events and leagues.” However, he said “our media and gaming operations have picked up right where they left off,” with the recent return of many sports.
“In [the fourth quarter], we were successful in preserving 83 per cent of our media app audience, achieving 70 average sessions per user per month versus 75 for the same period last year,” Mr. Levy said in the call to discuss the latest earnings. “Through the early fall, we have seen user numbers and engagement snap back to the pre-COVID levels as we got deeper and deeper into a very busy and exciting sports calendar.”
He also said the company set a new record quarter for its esports programming. “This continued growth in our established leadership position, and our coverage of the competitive gaming scene has resulted in more and more brands seeking to activate against this hugely compelling content,” he told investors.
Ryan Modesto, chief executive officer at Waterloo, Ont.-based independent investment research firm 5i Research Inc., notes the stock is up nearly 30 per cent over the past year and the company is in the emerging sports-betting industry that’s getting a lot of attention. However, he said investors should be cautious.
“There is a lot of opportunity in this space but competition is high and being a new industry or niche, there remains a lot of uncertainty in how things might unfold,” he said in an email to the Globe.
“Just looking at the stock chart, an investor can see how volatile the shares are. There is potential for higher risk investors but, in general, we prefer to see new strategies gain traction and the results start to come in as opposed to ‘hoping’ that the strategy works or the offerings gain acceptance from customers.”
If their strategy shift works, “there could be plenty of potential behind the shares,” he added. “If the sports betting does not pan out, the future direction of the company might look a bit murkier. So you have a bit of a potential binary outcome or scenario here.”
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