Internet casinos and sports gambling stocks will be abolished this year. But according to an analyst, the Eyegaming shares could be close to the ground, and there's a safe way to get a potential rebound.
In a new note to customers, Ross Capital analyst Edward Engel says that some investors could start eroding iGaming shares after recent penalties for the group and Rush Street Interactive is the preferred method of rebirth of Draft Kings (NASDAQ:DNG) and National Gaming (NQ).
Both DKNG and RSI are already indicating that EBITDA loss will deteriorate significantly in 2022 (~1.5 times)," writes Angel. "In the meantime, most operators are conducting a positive EBITDA by 2023 to provide catalysts that some investors want to buy in advance."
RSI shares fell 21.3% on Thursday after the game company reported a fourth-quarter loss as expected, with sales forecasting between $580 million and $630 million in 2022. Analysts predict $61.14 million. On the back of the update, several analysts have lowered the price target for iGaming.
Big Time iGaming Opportunities
Although RSI fell 50.73% year-on-year, the long-term outlook for iGaming shares continues to be compelling.
RSI's competition, the Kings draft, confirmed this Thursday on Investment Day. The company has increased its long-term total market forecast for North American online casinos and sports betting from $67 billion to $80 billion, of which $52 billion for eGaming.
Various game operators have already noticed that online casino customers spend more money and are more sophisticated customers than sports lovers. Also, iGaming offers a longer runway for growth, as it is currently only active and legal in some states, compared to the 30 states in which sports betting is conducted, and Washington DC.
Angel, analyst at Roth Capital, believes RSI has some positive points that can be overlooked today.
The analyst said, "I also think that the $250 subscription offer is 75% lower than its kind, and that the market share of RSSI is better than the CPA that helps reduce advertising." "The RSI releases of iGaming in Mexico and Ontario have blocked the path to profitability and investors have punished their shares by doubling EV/sales. The loss of EBlTDA in 2022 is, however, no indication to us of a long-term deterioration in profitability and a likely decline in EBlTDA loss in 2H22."
Competition keys for the iGaming stock
Given growing concerns about RSI and Draft Kings' profitable time sheets in the investment community, potential wildcards for these and others are the ghost of rich new competitors in this sector.
This can lead to higher advertising costs that burden profitability. That's exactly the opposite of what analysts and investors want to hear.
Industry leaders believe that high costs will limit the competition, but new market participants will continue to enter the market, and some remain idle. It's been reported that Apollo Yahoo Sports will merge with the OSB operator. "The fanatics are still on the verge of raising $1.5 billion worth of $27 billion recently," says Angels.
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