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.

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

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.

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

BUY into trough Q2'24e EPS growth

Q2: slight top-line growth acceleration and EPS growth trough, but watch out for unfavourable geo. mix again. BUY the dip, awaiting SBB programme as catalyst.

Evolution (Buy, TP: SEK1700.00) - Follow the fundamentals

We reiterate our BUY and SEK1,700 target price ahead of the Q2 results (due at 07:30 CET on 19 July), in which we expect further signs of Live revenue growth stabilising at c20% YOY. Given the poor share price performance and fundamentals moving in the right direction (confirmed by our player tracker), we believe the board should be proactive, act rationally and therefore consider a new buyback programme sooner than originally planned.

Evolution (Buy, TP: SEK1700.00) - Fundamentals in the right direction

According to our tracker, Evolution’s strong trading has continued more than halfway into Q2, with H1 player volumes up c40% YOY and 6% MOM so far in May. Given the strong fundamentals and support from our data, we believe that the weak share price gives a good buying opportunity. In June Evolution plans to launch ‘Lightning Storm’ (likely its largest launch ever), and finally we note that our player data correlates almost exactly with the company’s own ‘Game Rounds Index’. We reiterate our BUY ...

Evolution (Buy, TP: SEK1700.00) - Live buying opportunity

We reiterate our BUY and SEK1,700 target price after healthy but in-line Q1 results (Live revenue growth >25% YOY at constant FX). In our view, the weak share price despite a healthy start to the year, promising new games pipeline, high-conviction growth outlook (growth investments, e.g. recruitment), and long-awaited Live dealer contract with leading operator bet365 offers a solid buying opportunity.

Set for acceleration

Expansion investments weigh on Q1 margin, but great setup for solid outlook for remainder of '24e. Keep BUY — 17-14x '25e-'26e P/E and >5% FCF yield

Bet365 signing proving Evo's strength