On Wednesday, Braxton Bragg Gaming Group (NASDAQ: BRAG) and Bally’s (NYSE: BALY) proclaimed an iGaming content evolution pact. That could follow ace of multiple catalysts to sparkle the Canadian gaming technology provider’s long flailing shares.
In a notation to clients, Philip Milton Roth Capital analyst Edward I Engel initiated insurance coverage of Braxton Bragg stockpile with a “buy” and a $9 damage target, implying the shares can buoy two-fold from the Sep 21 close. He says the society is “an rising leader among business-to-business (B2B) iGaming suppliers.”
After recent M&A and licensing gains, Bragg now has the statistical distribution needful for ramping marketplace portion inwards regulated markets. Combined with an expanded portfolio of luxuriously performing games and tech, we modelling EBITDA doubling from 2022-24E and BRAG’s valuation rerating towards pure-play B2B iGaming peers,” wrote Engel.
Bragg provides net cassino and sportsbook engineering services to gaming operators via its ORYX Gaming brand.
Bragg Gaming Stock Risk/Reward
With a securities industry capitalization of $130.78 million, Bragg is doubtlessly a small-cap stock. It’s push down 56.66% o'er the yesteryear year, so in that respect is some risk of exposure inwards the name.
On the other hand, a recent circular of dealmaking could compensate dividends in the long run. For example, the acquisition of Spin Games brought unexampled licensing agreements inward the regulated US and Canadian River markets into the fold. That’s piece the aforementioned allot with Bally’s “significantly increases the diversity of the content Braxton Bragg features inward tonality regulated markets,” according to a statement.
Roth Capital’s Engel points come out that the acquisitions assign Braxton Bragg on rate to discharge a corresponding figure of young games each year as its larger, more well-heeled rivals. That’s a confirming trait in iGaming — an industry where cognitive content is king.
“In aggregate, it’s releasing a similar number of games/year as industry leaders the like IGT, Light & Wonder, and Evolution, which apiece hold over 20% US market place share. With a mathematical product pipeline, distribution, and market place get at like to industry leaders, we see Bragg asserting mid-single-digit market place portion in regulated markets,” added the analyst.
Bragg Stock Looks Cheap
When a gillyflower is mastered 56.66% in a year and labors beneath $5, as is the slip with Bragg, it’s soft to usurp the shares are inexpensive. However, in that location are of import differences 'tween “cheap” and “value.”
One risk with Braxton Bragg is that its largest customer accounts for 45% of total sales, spell its pinch 10 customers combine for 71% of revenue. Still, Engel says the stream caudex damage isn’t reflective of what could be compelling earnings before, interest, taxes, depreciation, and amortisation (EBITDA) growth.
“Bragg’s fastest-growing segments get high-pitched perimeter rev percentage agreements that should force receipts margins higher up 60% past 2024. With rapid revenue growth and stalls set costs, we reckon EBITDA olympian $20M past 2024 as margins come near long-term 25% targets. BRAG trades at 4x our 2024E EBITDA, but we check shares rerating towards peers at 5-10x as Bragg continues delivering results and increasing investors’ condemnation inwards this Earnings Before Interest Taxes Depreciation and Amortization ramp,” concluded the analyst.