On Friday, Citi reaffirmed its Buy rating on Evolution Gaming Group AB (EVO:SS) (OTC: EVGGF) stock, maintaining a price target of SEK1,500.00. Ahead of the company's third-quarter results due on October 24, the firm provided insights into anticipated performance based on current data trends.
Evolution Gaming is expected to report a slight increase in earnings before interest, taxes, depreciation, and amortization (EBITDA) margins for the third quarter of 2024. The forecasted EBITDA margin of 69.4% shows a slight improvement from the 68.7% in the second quarter of 2024 and is within the company's full year 2024 guidance of 69-71%.
The company's slot game rankings, which had seen a decline in the previous quarter, have stabilized in Europe and shown improvement in the United States as of September. The growth in game releases for the quarter is reported at 4% year-over-year and is expected to accelerate in the fourth quarter of 2024. Revenue growth from slots is projected to see a modest sequential increase of 3%, aligning with consensus estimates.
Citi also anticipates a robust 18% year-over-year growth in Live Revenue for Evolution Gaming in the third quarter, which is 2 percentage points above the consensus. This growth is attributed to the company's expanding lead over its main competitors in the market.
The firm expects a 3 percentage point foreign exchange headwind year-over-year, which is slightly better than the around 3.5 percentage point headwind reported by management for the second quarter of 2024. Additionally, the share count has been updated to reflect the buybacks conducted during the quarter.
Despite only minor adjustments to the full-year forecasts for 2024 and 2025, Citi's discounted cash flow (DCF)-based target price remains unchanged at SEK1,500. The firm's reiterated Buy rating comes with a designation of High Risk, acknowledging the potential volatility associated with the stock.
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