GameSquare holds Buy rating with steady stock target amid strong revenue

Monday, Roth/MKM reiterated its Buy rating and $5.00 stock price target for GameSquare Holdings Inc (NASDAQ: NASDAQ:GAME), following the company’s second-quarter financial results for the fiscal year 2024. GameSquare reported a significant increase in revenue, surpassing the firm’s initial estimates.

Still, the company experienced a shortfall in EBITDA, attributed to a lower gross margin as a result of a shift towards programmatic advertising revenue, which typically yields lower margins.

The company’s management has indicated progress in securing multi-year partnerships that promise to deliver additional revenue at higher margins. These partnerships are expected to contribute positively to the company's financial performance in the future.

In a move to bolster its financial position, GameSquare has successfully raised $36 million through non-dilutive capital. This influx of capital is intended to support the company’s organic growth and may provide the financial stability needed to execute its strategic plans without diluting existing shareholders' equity.

The analyst's maintained Buy rating and price target are reflective of GameSquare's recent achievements and future prospects. The company's ability to secure multi-year partnerships and raise substantial capital appears to be key factors in the analyst's positive outlook.

GameSquare, with its strengthened balance sheet and strategic partnerships, is positioned for organic growth. The maintained price target of $5.00 suggests confidence in the company’s potential to achieve its financial and operational goals.

In other recent news, GameSquare Holdings reported a 24% increase in pro forma revenue for the second quarter of 2024, hitting $28.6 million, and a significant improvement in profitability. The company's pro forma adjusted EBITDA loss improved to $5.4 million, a significant decrease from the $10 million loss in the same period last year.

CEO Justin Kenna outlined strategic priorities, including the integration of FaZe Clan, divestiture of noncore assets, and leveraging proprietary assets for growth. New brand partnerships worth $3 million with Topgolf, 5-hour ENERGY, and Dairy MAX were also announced.

GameSquare anticipates these recent developments will contribute to an annual revenue exceeding $100 million with a gross margin between 22.5% and 27.5%. The company expects the benefits of current investments to materialize in the second half of 2024 and is optimistic about the growth of the events business. However, it should be noted that the gross margin declined due to a less profitable mix of sales.

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