In a recent analysis, Citi remains optimistic about Evolution despite highlighting short-term challenges that could put pressure on the stock. The analysis points out issues in Georgia and Asia, leading to a reduction in margin forecasts for the live casino company.
Citi predicts that profit margins will fall below previous guidance, with an estimate of 68.5% compared to the company’s own forecast of 69-71% for 2024. The Q4 forecast indicates a margin of 68.7%, excluding the impact of debt reduction.
On the flip side, Citi raises its long-term revenue forecasts, anticipating a 3% increase this year and 1% next year. While North America is expected to contribute positively, Asia is downgraded. One contributing factor is the reduced additional purchase debt reported in Q3, without which the revenue increase would have been estimated at 0% this year.
As a result, EBITDA is expected to increase by 3% this year but decrease by 1% next year. Despite the risks involved, Citi reiterates its buy recommendation and raises the target price by 70 SEK to 1570 SEK, representing a 60% upside from the current price of 982 SEK.
Evolution saw a significant rise after its Q3 report but has since retraced. Year to date, the stock is down by 18%.
| Evolution, MEUR | Q3-2024 | Konsensus | Förändring mot konsensus | Q3-2023 | Förändring |
| Nettoomsättning | 549.4 | 517 | 6.3% | 452.6 | 21.4% |
| Ebitda | 415.3 | 354 | 17.3% | 318.6 | 30.4% |
| Ebitda-marginal | 75.6% | 68.5% | 70.4% | ||
| Rörelseresultat | 379.2 | 320 | 18.5% | 287.1 | 32.1% |
| Rörelsemarginal | 69.0% | 61.9% | 63.4% | ||
| Resultat före skatt | 378.2 | 292.5 | 29.3% | ||
| Nettoresultat | 328.6 | 272.8 | 20.5% | ||
| Resultat per aktie, EUR | 1.57 | 1.28 | 22.7% |
Consensus data from Bloomberg.
In summary, while short-term challenges may impact Evolution’s stock price, Citi’s long-term outlook remains positive. With a revised target price and buy recommendation, the company’s potential for growth and success in the live casino industry is still promising.