October player activity stabilising

Evolution (Buy, TP: SEK1570.00) - Live casino resilience

We have raised our target price to SEK1,570 (1,550) and reiterate our BUY after signs of stabilising Live revenue growth (c20% YOY at constant FX) and delivery of mitigating factors for the capacity constraints in Georgia. We have fine-tuned our 2025e EPS and expect more execution of the cash distribution and EPS growth case. We are attracted to the expansion story, e.g. the upcoming studio launches in Brazil and the Philippines.

Impressive execution

Relief

Heads-up for report 24 October

Patience shall be rewarded

In-depth: we launch our Evo player activity tracker update. Risk to consensus Q3 and '24 margin guidance, but market could discount even worse – keep BUY.

Evolution (Buy, TP: SEK1550.00) - Data needs to be explained

According to our tracker, Evolution’s daily average players dropped 9% QOQ in Q3. We struggle to fully understand the softness, although there could have been a slight negative effect from the temporary Union strike in the Tbilisi studio. On the positive side, MOM growth has returned in October (+4%) and the company should see volume support in H2 from a stronger Live game release schedule, among other things.

Terminating coverage

FDJ completes the acquisition

Evolution (Buy, TP: SEK1550.00) - Turn the page and let’s get to work

We reiterate our BUY, but have lowered our target price to SEK1,550 (1,600) on a 3% cut to our 2024e EBIT, reflecting temporarily reduced capacity of tables in Q3 in a key studio (union strike in Tbilisi). The share buybacks should continue in Q4, and focus shifting to 2025e should be positive for the equity story in our view, with a return to healthy EPS growth (nearly 20% YOY), and more tangible evidence of the much-improved capital allocation strategy.

Georgia on my mind, but already discounted

Jul & Aug down 8% from Q2 in Sweden

Evolution (Buy, TP: SEK1600.00) - Not much of a storm

According to our tracker, Evolution’s daily average players declined by 7% QOQ so far in Q3. Our data coupled with the temporary turmoil in the Tbilisi studio could imply minor downside risk to consensus Q3e Live revenue growth. Positively, MOM player growth has returned in September, in line with the sector’s seasonal patterns, and the weak share price suggests generally low Live revenue growth expectations among investors.

Impressive margin progress

Strong Q2 beat as growth keeps accelerating despite marketing ratio remaining lower than expected. Limited revisions despite the beat – keep HOLD on the bid.

Strong Q2 with >22% margin

Evolution (Buy, TP: SEK1600.00) - Strong cash from a new Swedish…

After a softer Q2 than we expected, we have reduced our 2025e EBIT by 4% from a lowered revenue forecast. From H2 2024, EVO expects positive effects from the new games and recent expansion, and repeated its 69 –71% 2024e EBITDA margin guidance. The news from the board that EVO should distribute 100% of excess cash to shareholders was a key positive and should be increasingly in focus given the strong FCF generation.

H2 acceleration awaits – keep BUY

Q2 top line surprisingly soft, but FY margin guidance maintained, indicating a strong acceleration in H2 from a mgmt. that has never missed guidance since joining Evo in '15-16.

Surprising miss, but driven by Asia

Heads-up for report 19 July

Euros boost strong Q2

Q2e: 8% organic top-line growth, 11% excl. North America exit, as we have indications of a strong summer. Stick to HOLD – neutral risk-reward ahead of the bid acceptance.