We came across a bullish thesis on Gambling.com Group Limited (GAMB) on Twitter by InflexioSearch. In this article, we will summarize the bulls’ thesis on GAMB. Gambling.com Group Limited (GAMB)’s share was trading at $11.77 as of Nov 15th. GAMB’s trailing P/E was 17.57 according to Yahoo Finance.
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Gambling.com Group, an affiliate marketing business with a focus on online gambling, has faced challenges but is poised for strong organic growth. The company operates various gambling-related websites that help online gaming operators like Flutter and DraftKings acquire customers. Gambling.com has a highly profitable business model, with a 95% gross margin, 20%+ net income margin, and a 20%+ return on equity. Despite recent setbacks, the company maintains a pristine balance sheet and trades at a relatively low 11x EPS multiple. It is also actively repurchasing stock, reflecting management’s confidence in the company’s future.
Around 50% of Gambling.com’s revenue comes from a cost-per-action model, 15% from a revenue share model, and 35% from a hybrid model. The company generates 62% of its revenue from iCasino operations, with sports betting contributing the remainder. Geographically, 56% of revenue comes from North America, with the rest primarily from Europe. After experiencing rapid growth between 2017 and 2022, the company faced some challenges in 2023 and early 2024, mainly due to changes in Google’s treatment of commercial content. This resulted in a sharp decline in stock price from $15 to under $8 by mid-2024. A significant impact was felt when Google’s changes diminished the effectiveness of Gambling.com’s media partnerships, forcing the company to revise its guidance downward. However, management quickly adapted by adjusting their strategy and focused more on accelerating growth through their own websites. This adjustment led to a Q2 beat and an upward revision of guidance.
Looking ahead, Gambling.com is well-positioned for growth. It benefits from the ongoing legalization of iGaming, which is projected to grow globally at a 12% compound annual growth rate (CAGR) and 28% CAGR in the U.S. through 2028. Additionally, affiliate marketing currently accounts for only 5% of new customer acquisitions in the U.S., compared to 30% in mature markets, providing a strong growth tailwind. The company is also benefiting from iGaming legalization in Latin American countries like Brazil, which further supports its growth prospects. On the M&A front, management has been selectively acquiring smaller affiliate businesses at attractive multiples (5-6x EBITDA) and quickly improving their profitability. Gambling.com recently acquired FreeBets for 5.6x EBITDA and is already ahead of its synergies.
Gambling.com remains focused on its growth strategy, the company has committed to achieving $100 million in EBITDA over the next few years, with management aiming for $70 million of this figure organically and the rest through strategic acquisitions. Given its strong fundamentals, disciplined M&A strategy, and market tailwinds, Gambling.com’s stock could see significant upside, potentially reaching $30+ per share. With a share repurchase program in place, the stock presents an attractive opportunity for investors.
Gambling.com Group Limited (GAMB) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held GAMB at the end of the second quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of GAMB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GAMB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.