Analysis: What Is Driving A Huge Run-Up In theScore Stock?

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US sports betting stock has seen some crazy run-up in the last twelve months, but we might have a new champion in theScore.

Canadian-listed theScore has doubled in value in February alone and is now up around 900% since November. That’s despite a EBITDA loss of $7.3 million in the final quarter of 2020.

So what’s driving the surge?

Tangible results for the company

Toronto-based Eight Capital analyst Suthan Sukumar said the Q4 results were a key catalyst despite that bottom-line loss.

Chiefly, sports betting handle was up 535% year-over-year to $44 million for the period.

“That demonstrated the betting platform is real,” Sukumar said. “That the theory of a betting and media platform was actually gaining real traction. That was important as they hadn’t shown material handle growth before then.”

Sukumar said the growth also included market-share gains rather than just new state launches.

“Combine that with the prospect of entering more states and the US regulatory backdrop accelerating, that opportunity is becoming more real,” the analyst said.

US dual listing for theScore stock

At those same results, theScore announced plans to pursue a dual US listing to gain access to a “significantly larger pool of capital.”

That could lead to more trading volume and a potential jump in market valuation, CEO John Levy said.

That plan was approved by shareholders on Wednesday and is potentially another catalyst as theScore is rerated towards a DraftKings-style valuation

Online gaming software company GAN is perhaps a good analogy here. The company was valued at around $200 million on average in the final six months of its UK listing. It more than tripled after it relisted in the US.

TheScore is looking at a dual listing rather than a complete switch, but it’s clear the US market places higher multiples on gaming companies than other markets.

Hot prospects north of the border

Canada sports betting was perhaps the initial catalyst for theScore stock back in November.

That’s when the Canadian government announced plans to end the federal ban on single-game sports betting. The province of Ontario also plans to end its lottery-run monopoly on online gambling.

That would allow private operators into the market for both sports betting and casino. Ontario alone would be equal to the fifth-largest state in the US with 15 million citizens. 

How big could the market be?

TheScore estimated a market potential in Ontario of $1.5 – $2.1 billion in annual gross gaming revenue. 

And per ComScore data, theScore is outperforming rival Canadian sports media properties in app downloads.

“I think theScore is uniquely positioned in Canada,” Sukumar said. “I think they’ll be one of the regulator’s top picks to go into the market first. And they can dominate the Canadian market.”

Could theScore be an M&A target?

All of these catalysts have not gone unnoticed by the public markets. And rival operators have likely been paying attention too.

“I absolutely think theScore is an attractive takeout target,” Sukuamar added. “Think about the asset these guys have built. It’s the only real media and betting platform that’s actually working. Everyone talks about it but no one truly has a platform like this. It’s a very attractive target for an online gaming incumbent or a land-based player to accelerate their digital strategy.”

Will the run-up continue?