Is one of the best-known Esports betting providers getting into a complete financial mess? The question is quite justified. The Esports Entertainment Group has lost almost two thirds of its value within a week. At least among the first analysts, the alarm signals are already on red. We have the information for you.
Quarterly targets missed by a landslide
Esports Entertainment Group is listed on the NASDAQ stock exchange. In the official company announcement, the company announced the previous week that it missed Wall Street’s projected revenue target for the fourth quarter of 2021 by a whopping 22%. At the same time, Esports Entertainment Group lowered its revenue and earnings expectations for 2022. The news has been more than critically received by the financial markets. The share price has plummeted. On Tuesday, the share price fell by 8.62%. On Wednesday, there was the total collapse of 58.25%. At the end of the week, the Esports shares then went down another 5.65%.
Already in the previous year high loss of value
The slump on the NASDAQ stock market does not come from nowhere. Already last year, the value of Esports Entertainment Group had fallen by a whopping 93.3%. By now, it is clear that the company’s low revenues could lead to serious liquidity problems or that they are already present.
Questions about transparency and financial structure
The problem of the eSports provider is that the transparency of its business direction and financial structure are not really clear. In addition, there have been huge, business mistakes in the past few months. We are thinking here of the reorganization of the betting market in the Netherlands. Rivals like Kindred, 888Holding or Entain have already left the market as of October 1. Esports Entertainment has not made a clear decision to adjust or leave the Dutch market until today.
Analysis from the expert
According to Edward Engel (Roth Capital), there was only $1 million in cash on hand as of Dec. 31, 2021. The company has a monthly cash burn of approximately $1.3 million, which can be covered solely by current revenues. The analyst’s forecast for Esports Entertainment is correspondingly cautious.
“The limited visibility into GMBL’s ultimate cap structure makes it difficult to properly value shares, and we believe investors should only consider investing in special situations. If taken at face value, GMBL’s implied sales are extremely cheap by 0.9x EV at FY22. But we have little conviction in GMBL’s ultimate cap structure within ~6 months,” said Edward Engel.
New Jersey launch could turn things around
Conceded by the analyst was that the eSports sector itself is still considered a growth market. Esports Entertainment Group has recently been pushing its North American business. The approval granted for the betting services in New Jersey could also bring about a turnaround for the shares. With a realistic price target of $1.40, 20% growth would be possible at the moment.
Facts about the Esports Entertainment Group
Esports Entertainment Group was founded in Malta in 2008. The company specializes in offering betting markets on eSports events, including the corresponding odds. In addition, betting offers for “normal” sports betting can also be obtained via the group of companies. Esports Entertainment Group’s customers include a wide variety of gambling companies from the sports betting and online casino sectors.