On Friday, Truist Securities adjusted its outlook on Gambling.com Group Ltd. (NASDAQ: GAMB) shares, reducing the price target to $12 from the previous $13 while still maintaining a Buy rating on the stock.
The adjustment comes after the company's first-quarter adjusted EBITDA surpassed forecasts due to robust revenue performance across various regions. Despite the positive earnings, the firm's 2024 guidance was revised downward, attributed to recent changes in Google (NASDAQ:GOOGL)'s search ranking methodology.
Gambling.com recently completed the acquisition of Freebets.com, a move management believes will yield significant operational improvements.
Although the 2024 guidance was lowered, management expressed confidence in meeting the consensus EBITDA for fiscal year 2025, as its wholly-owned assets are not impacted by the Google algorithm change.
Truist Securities remains optimistic about Gambling.com's stock, citing potential benefits from the acquisition and increased traffic to its owned assets.
The firm's decision to maintain a Buy rating reflects the belief in Gambling.com's potential for integration improvements and the anticipated upside from its wholly-owned properties.
Despite the lowered earnings forecasts for 2024 and 2025, which were adjusted down by 9% and 8% to the midpoint of the guidance respectively, the investment firm sees a favorable outlook for the company.
The recent developments with Google's search rankings have prompted a cautious approach to the online gambling company's short-term prospects.
Nevertheless, the long-term perspective held by Truist Securities suggests confidence in Gambling.com's strategic initiatives and its ability to adapt to the evolving digital landscape.
In summary, the price target reduction to $12 reflects a conservative stance in light of the external challenges posed by the search engine changes.
However, the sustained Buy rating indicates an overall positive expectation for Gambling.com's performance, particularly as it leverages its recent acquisition and capitalizes on its proprietary assets.
InvestingPro Insights
With Gambling.com Group Ltd. (NASDAQ: GAMB) navigating through the challenges posed by Google's algorithm updates, a glance at real-time data and InvestingPro Tips can provide a clearer picture of the company's financial health and market position. The company's stock has been trading near its 52-week low, which, coupled with an RSI suggesting the stock is in oversold territory, could indicate a potential buying opportunity for investors considering the stock's fundamental strengths.
InvestingPro data highlights Gambling.com's impressive gross profit margin of 91.61% over the last twelve months as of Q1 2023, showcasing the company's ability to maintain high profitability relative to its revenues. Furthermore, the company holds a solid cash position, with cash flows that can sufficiently cover interest payments, a reassuring sign of financial stability. This is particularly relevant as the company holds more cash than debt, providing a buffer against market volatility and external pressures such as changes in search ranking methodologies.
Moreover, with a market capitalization of $289.7M and a P/E ratio adjusted for the last twelve months of 11.05, Gambling.com's valuation metrics suggest that the stock may be undervalued, especially considering the high gross profit margins and the company's ability to remain profitable over the last year. Analysts have predicted that the company will be profitable this year, which aligns with the optimistic view expressed by Truist Securities despite the revised guidance.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available that could further inform investment decisions. These include insights on earnings revisions, stock performance over the last week, and the company's dividend policy. To access these tips and more, visit https://www.investing.com/pro/GAMB and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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