GAN Limited Will Recover But The Market Needs To Change Mood

In the event of a recession, the demand for gambling and lotteries will suffer less than other services. The global market for this activity is expected to grow nearly 14% annually over the next six years to about $145 billion in 2028. In the past, gambling found an ally in the crisis caused by the COVID-19 virus. During the pandemic, companies that generate and sell these services saw their sales surge.

Gambling stocks have fallen in line with the stock market performance. Some stocks, such as Sportradar Group AG, have suffered from the bearish sentiment. However, the possibility to take advantage of significantly lower stock prices creates the following investment opportunity. Once in bullish mode, a solid shareholder return could occur among online gambling stocks if the market valuation reflects the expected strong 14% annual growth in the global online market.

GAN Limited stock has been underperforming the market by 45% since the start of the year. The company's fundamentals are positive. GAN Limited will recover when the bullish market returns. It will be difficult for shareholders to assume a brighter future for the stock. Gans Limited is well-positioned to benefit from a return to bullish sentiment.

GAN Limited operates two business segments: Business-to-business and Business to Consumer. The B2B segment is growing well. B 2C is not so much. GAN Ltd operates proprietary technology enabling online sports betting in select overseas markets. It also holds leading positions in Europe and South America. Its revenue for the second quarter of 2022 fell nearly 15% sequentially. However, it remained almost 2% above the corresponding quarter the previous year. Gross profit margin declined 420 basis points quarter-on-quarter and 250 basis point year- on-year to nearly 64%.

Stronger US dollar and aggressive U.S. Federal Reserve explain certain downward trends in GAN Limited's stock. The stock's downward trend corresponds to an appreciation of the US dollars against other currencies in Europe and Latin America. However, the stronger US Dollar was the result of hawkish stance on interest rates. Investors are more aware of risk of investing in the stock market after the Fed's rate hike.

The number of active B2C customers increased from 187,000 in Q2 2021 to 230,00 in Q1 2022 and from there to 260,500 in 2022. The B 2C marketing expense ratio increased to 22% in 2018. This is due to the execution of the company's growth strategy to expand into Latin American markets.

GAN Limited will recover but the market needs to change its mood. The company's revenue will increase by 14.7% to 22.8% from 2021 to 2022. Its pro forma EBITDA is expected to increase from a net loss of $500,000 in 2021, to $10 million-$15 million in 2022, if the US Federal Reserve eases monetary tightening.

GAN Limited will recover but the market needs to change its mood. The stock price is trading at low levels, but it is far from the oversold level. The company has interesting catalysts implying the potential for a good recovery.

GAN stock has taken a hit amid bearish sentiment sparked by recession signals from the US Federal Reserve. The possibility of a stock price recovery depends on the Federal Fed's next steps. GAN's operations are well-positioned to capitalize on tailwinds from expansion of global online gambling activity.