Gambling.com’s decision to acquire OddsJam has drawn praise from Jefferies Equity Research analyst David Katz, who highlighted the strategic benefits in a December 12 investor note. Katz described the deal as immediately accretive to both earnings and margins, with projections for 20% growth in OddsJam’s business by fiscal year 2025. He also reaffirmed a “Buy” rating for Gambling.com (GAMB) shares, raising his price target from $18 to $20.
Deal Details: A Financial Breakdown
The terms of the deal see OddsJam’s shareholders receiving $80 million upfront, including $10 million in Gambling.com stock. There’s also a performance-based incentive: if OddsJam doubles its cash flow by 2026, an additional $80 million will be paid, up to half in stock. Katz, however, was cautious about the likelihood of OddsJam achieving this 100% cash flow boost. He forecasts a more conservative 20% increase in revenue and cash flow next year, reaching $31 million and $14 million, respectively.
Gambling.com aims for a swift conclusion to the acquisition, targeting a January 1 close. This would mark an expansion into OddsJam’s niche, which focuses on offering consumers betting recommendations, including arbitrage opportunities and standard wagers with positive expected outcomes.
Why Katz Likes the Deal
Katz framed the acquisition as a well-priced, strategic addition that bolsters Gambling.com’s long-term value. He pointed out the immediate revenue-generating potential of OddsJam and highlighted its ability to diversify Gambling.com’s offerings. Notably, OddsJam brings access to 300 sportsbooks worldwide, enhancing Gambling.com’s distribution and product capabilities.
“There’s a lot to like,” Katz commented succinctly, noting the complementary nature of the two companies. He specifically appreciated OddsJam’s U.S.-centric subscription model and its focus on online sports betting, which aligns with the ongoing surge in this market. These factors position Gambling.com to tap into a growing segment while maintaining its strength in igaming.
Strategic Moves Beyond the Acquisition
The acquisition is not the only move Gambling.com has made recently. Katz praised the company’s recent repurchase of three million GAMB shares at $10 each. Those shares, now valued at $15 apiece, highlight the company’s adept financial management.
This share buyback, coupled with the OddsJam acquisition, signals a clear strategy: Gambling.com is focused on creating shareholder value through calculated investments and expansions.
Market Impact and Projections
The acquisition comes as online sports betting continues to grow rapidly in the U.S., making OddsJam’s focus on this area particularly timely. According to Katz, the deal positions Gambling.com to capture new growth opportunities while leveraging OddsJam’s subscription-based revenue model.
Katz’s updated projections reflect his optimism. For 2024, he now anticipates Gambling.com’s revenues to rise from an estimated $142 million to $173 million. Similarly, cash flow is expected to increase from $53.9 million to $67.8 million, thanks to the synergies created by the acquisition.
Key Takeaways
- Immediate Benefits: The acquisition is expected to boost Gambling.com’s earnings and margins right away.
- Growth Potential: OddsJam’s projected 20% growth in revenue and cash flow for 2024 aligns with Gambling.com’s broader goals.
- Strategic Fit: The acquisition diversifies Gambling.com’s portfolio, adding value through U.S.-oriented sports betting and a robust subscription model.
- Global Reach: OddsJam’s connections to 300 sportsbooks worldwide expand Gambling.com’s reach and capabilities.
David Katz’s endorsement underscores the broader industry optimism around the deal. As Gambling.com integrates OddsJam, it’s clear that both companies stand to benefit from this strategic partnership.
