GMBL - Esports Entertainment Group Inc. (GMBL) - Stepping Up Enhanced Revenue Spending

Quarterly preview. We believe that the company is likely to miss our original fiscal Q4 revenue and adj. EBITDA expectations, reflecting a one-time impact from a switch to Argyll's gaming license to Malta and consolidation into Lucky Dino, which involved a new, more robust technology platform, and higher level of investment spending. We believe that the investment spend will enhance future revenue growth. The company is expected to report fiscal Q4 near September 28th. Tweaking Q4 estimates. We are lowering our revenue expectation from $10.5 million to $8.8 million to reflect the disruption in revenues in the quarter, lowering our Agyll revenue assumption by roughly $1.5 million. We flowed through the revenue shortfall to our Adj. EBITDA estimate, raising our loss estimate from $2.1 million to a loss of $3.8 million.Adjusting fiscal 2022 estimates upward. We are raising our fiscal 2022 revenue estimate from $70 million to $95 million to reflect the Bethard acquisition, which is viewed as conservative and below management's guidance. Given higher levels of investment spending, however, we are raising our adj. EBITDA loss estimate from a loss of $500,000 to a loss of $7 million. Files $20 million ATM. Last week, the company filed a shelf registration to sell up to $20 million in equity through an At The Market (ATM) equity offering program. We believe that the proceeds from the ATM will be sufficient to fund the company's investments until it swings toward positive cash flow, which is expected by the end of 2022. Reiterate Outperform rating, but lower price target. Near current levels, the GMBL shares trade at 2.4 times Enterprise Value to our fiscal 2022 revenue estimate, or well below its igaming and esports peers. As its peer group valuations have decreased, however, we are revising our price target from $20 to $15, which would reflect a valuation in line with current peer group valuations. Read More >>