CDRO - Codere Online Luxemburg (CDRO) - Betting on Latin America
Initiating with an Outperform rating. We are initiating coverage of Codere Online with an Outperform rating and a $10 price target. Codere Online is an international online casino and sportsbook company that operates in both Europe and Latin America. We believe the company has compelling growth prospects in Latin America, which is an emerging online gambling market. Leveraging a strong brand. Codere Online maintains a partnership with its parent company, Codere Group, an operator of casinos in Europe and Latin America for over 40 years. It has allowed Coder Online to quickly establish operations in Latin America, with the Codere Group providing in-person customer service, and customer data. Additionally, the partnership allows Codere Online to benefit from the recognized Codere brand and regulatory prowess, a meaningful competitive advantage.Expanding market opportunity. According to Grand View Research, the global market size for online gambling could be as large as $127.3 billion by 2027, which assumes growth of 11.5% CAGR for the period of 2020-2027. Many countries in Latin America lag the U.S. and Europe technologically and in regard to online gambling regulation. As the gap narrows, it will allow for more online gambling activity and provide a significant opportunity for established online casino operators.A clean balance sheet. Codere Online became public in December, 2021. At the time of the de-SPACing, the company had a cash position of $144mm and virtually no debt. In our view, the the company has significant financial flexibility to fund its growth strategy, including expanding technological capabilities, to establish its brands in its current and expansion markets.Compelling stock valuation. Near current levels, the CDRO shares trade at 1.5 times enterprise value to our 2022 revenue estimate, well below the average for industry peers. Our price target of $10 represents a target EV/2022 revenue multiple of 2.6 times, in line with its peers. Read More >>