On Tuesday, Jumbo Interactive Ltd (JIN:AU) stock received an upgrade from JPMorgan (NYSE:JPM), shifting from an Underweight to a Neutral rating. Accompanying this rating change, the firm also raised the price target to AUD13.30 from the previous AUD12.15. The revision is attributed to better-than-expected turnover and margin outcomes.
The analyst from JPMorgan highlighted several factors contributing to the more optimistic assessment of Jumbo Interactive. A key element is the potential boost from a favorable jackpot run in games like Powerball and Oz Lotto, which could provide a short-term benefit.
Additionally, the analyst noted that the company's price-to-earnings (P/E) ratio has decreased from nearly 24 times to around 19 times throughout the calendar year 2024, positioning it below the averages of the past two and three years.
Furthermore, there has been a downward adjustment in consensus estimates for earnings per share (EPS) for fiscal years 2025 and 2026, which have decreased by 15% and 13% respectively since the beginning of the calendar year 2024. This moderation in valuation has been a factor in the analyst's revised stance towards the stock.
The report also pointed to the scaling of Jumbo Interactive's Daily Winners program, which is expected to start generating a high-margin recurring revenue stream that is not dependent on jackpot outcomes. Although the program is in its early stages, the potential for revenue and earnings growth is considered significant if the scaling is successful.
In summary, the upgrade reflects a combination of improved financial performance, a favorable gaming environment, a more attractive valuation, and promising growth prospects from new revenue streams.
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