On Wednesday, Stifel reaffirmed its Buy rating on Codere Online Luxembourg S.A. (NASDAQ: CDRO) while maintaining the $10.00 price target. The company's third-quarter performance exceeded expectations, with a net gaming revenue (NGR) that was 5% higher than Stifel's forecast and an adjusted EBITDA of €1.5 million, surpassing the anticipated €1.1 million.
Despite the gains being more modest compared to previous quarters, the results were viewed positively, particularly given the mid-single-digit percentage foreign exchange NGR impact and slight customer acquisition cost inflation in Spain and Mexico due to new market entrants.
Codere Online has updated its financial guidance for FY24, adjusting its NGR and adjusted EBITDA projections to the higher end of the previously stated ranges. This adjustment effectively increases the midpoint guidance by 1% for NGR and 25% for adjusted EBITDA. The company's shares have seen a significant rise, nearly tripling year-to-date. However, the valuation is still considered attractive when compared to global peers.
The firm notes that Codere Online's strategic focus on the less competitive but potentially lucrative markets of Spain and Mexico provides a robust foundation for organic growth and high returns. While there is a need to monitor competition, Stifel suggests there could be potential for share price appreciation in calendar year 2025. This could be driven by the company's continued organic growth and margin expansion, along with the possibility of acquisition interest, which may further support the stock's valuation.
Stifel has adjusted its 2024/25 net gaming revenue estimates upward by 1%, reflecting the company's positive outlook. The $10.00 price target remains unchanged, underscoring the firm's confidence in Codere Online's performance and market position.
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