Canaccord Genuity has a price target of C$3.60 for the esports media firm, which has C$6.2 million in pro forma revenues.
The unaudited statement disclosed C$3 million in revenues for the period that ended September 30, 2019, while the company reported pro forma revenues (that assume the merger of Enthusiast, Aquilini GameCo and Luminosity) footing C$6.3 million. Debt stood at C$11.1 million for the quarter.
As Enthusiast has positioned itself as a media-focused entity — reaching a network of 200 million gamers monthly — the company noted that 76 percent of revenues came from its media divisions. In other words, pro forma media revenue per user totaled C$0.10 during the period.
Since the merger was approved by shareholders on August 27, Enthusiast has reported a C$7.2 million cash position in tandem with a 49 percent pro forma consolidated gross margin. The merger was officially completed on September 3.
“We closed a transformational merger in the quarter between Enthusiast, Aquilini GameCo and Luminosity and we are focused on executing our growth strategy through investing in revenue optimization tools and monetization strategies to drive higher revenue per viewer and higher margins,” Adrian Montgomery, CEO of Enthusiast Gaming, said in a press release.
Despite emerging as the leading esports media organization in both North America and the United Kingdom, the company’s share price has told a different story.
Shares of Enthusiast Gaming stood at C$1.90 as of market close on Monday. Canaccord Genuity released an analyst report setting a “speculative buy” rating with a price target of C$3.60.
In a further sign of optimism, the report highlighted that revenues and earnings before interest, tax, depreciation and amortization (EBITDA) came within expectations.
As the quarter witnessed a number of strategic acquisitions — including the completed acquisition of The Sims Resource in September and later mobile gaming firm Steel Media in October — analyst Robert Young at Canaccord says that these key deals will help spur growth for Enthusiast in the fourth quarter of 2019.
“We expect the benefits of the combination to begin slowly in Q4. For example, direct sales efforts and an extended subscription model acquired with The Sims Resource have yet to ramp in Q3 and we expect a small impact in Q4,” Brown said in the report.
Canaccord estimates that revenue for Enthusiast in 2020 is projected to reach between C$21.6 million and C$36.4 million, bolstered by media revenue in addition to high growth potential.
“It’s important for us to remain diligently focused on our growth strategy and continue improving on our execution. I am looking forward to a strong finish to the year,” Montgomery said in the release.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.