On Thursday, Oppenheimer upgraded SGHC Limited (NYSE: SGHC) stock from Perform to Outperform, setting a new price target of $6.00. The firm recognized SGHC's effective management in critical markets, including Africa, Europe, and Canada, which has led to a more predictable earnings profile. This is further reinforced by the company's recent increase in its 2024 core-EBITDA guidance by 15%, from €45 million to more than €345 million.
SGHC's positive outlook is supported by projections for iGaming growth of 10% in 2025 and core-EBITDA margins of 22%. There is additional potential for gains as the company considers expanding its Spin brand into new markets. Oppenheimer notes that SGHC is currently trading at 5 times its estimated 2025 EBITDA, which is lower than its peers' average of 7 times, despite SGHC's superior growth prospects and a stronger balance sheet, highlighted by its €297 million in cash.
The discount on SGHC's shares is attributed to its lower trading liquidity. However, Oppenheimer anticipates that the expected double-digit EBITDA growth in 2025 will help the stock price surpass the $5.00 threshold. The new price target of $6.00 is based on a 6 times multiple of the estimated 2025 EBITDA and is believed to appropriately reflect the current liquidity discount.
In other recent news, Super Group has reported significant growth in its third-quarter revenue and adjusted EBITDA for 2024. The company's total revenue reached a record €395 million, up 13% from the previous year, while adjusted EBITDA surged by 52% to €95 million. Super Group's margin exceeded its target, hitting 24%, largely driven by its casino sector, particularly in Africa and Canada, which contributed 83% of the total revenue.
The company has also announced plans to initiate a regular dividend and has a positive outlook on its long-term margins. Super Group has ceased operations in the U.S. sportsbook market, with closure costs lower than expected. The company is now targeting long-term margins of 22% to 24% by 2025 and is considering a special dividend before year-end.
These recent developments indicate a strategic shift in Super Group's operations, with a focus on sustainable growth and profitability. The company's strong cash position, with €297 million in unrestricted cash and no debt, further underscores its financial stability. The recent performance and future outlook have led to positive revenue growth in New Jersey and Pennsylvania's iGaming sectors, and the company is actively engaging with regulators in Africa to leverage local market opportunities.
InvestingPro Insights
Recent data from InvestingPro aligns with Oppenheimer's bullish outlook on SGHC Limited. The company's stock has shown remarkable momentum, with a 60.06% price return over the last three months and a 46.24% return over the past six months. This strong performance is reflected in the stock trading near its 52-week high, with the current price at 97.24% of that peak.
InvestingPro Tips highlight SGHC's solid financial position, noting that the company "holds more cash than debt on its balance sheet," which supports Oppenheimer's observation of SGHC's strong balance sheet. Additionally, SGHC has been "profitable over the last twelve months," with a revenue of $1.62 billion and a gross profit margin of 45.73% for the same period.
However, investors should be aware that the stock is currently "trading at a high earnings multiple," with a P/E ratio of 63.05 (adjusted for the last twelve months as of Q2 2024). This high valuation could be justified by the company's growth prospects, as evidenced by its 11.4% revenue growth over the last twelve months.
For those interested in a deeper analysis, InvestingPro offers 10 additional tips for SGHC, providing a more comprehensive view of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.