RE:Year end conference Scotia’s Kevin Krishnaratne lowered his target for Enthusiast Gaming Holdings Inc. (
) to 35 cents from 50 cents with a “sector perform” rating. The average is 82 cents.
“While we fully agree with management’s decision to focus on its owned and operated properties to drive a significantly better margin profile (we estimate GM-percentage moving to 60 per cent in CY24 vs. our prior estimate 40 per cent) alongside meaningful reductions to its cost base (25-per-cent headcount reduction + exit of running ad tech infrastructure on its own), the impact of such changes won’t start to be evident until at least Q2, with a clearer picture more likely in Q3/Q4,” he said. “Our revenue forecast moves meaningfully lower on mix shift, with GP estimates moving down more modestly and Adj. EBITDA profits still in sight for CY24 (more a 2H story). Pursuant to changes to our forecast and a lowering of our target multiple to 0.7 times 2025 GP (vs. 1.0 times previously) on elevated execution risk on the strategy shift near term, our target moves to $0.35.”