Betsson stock climbs on robust Q1 25 earnings

Betsson released its Q1 25 results on April 29, 2025, showing growth in both revenue and profits. Revenue increased by 18.3% y/y to SEK3,329m, supported by continued high customer activity. Operating income rose by 8.5% to SEK881m, with margins expanding by 239bp to 28.9%. Net profit increased by 13.1% to SEK549m. Following the announcement, the stock has risen by 13.8% to date.

Betsson B, established in 1963 and headquartered in Stockholm, Sweden, invests in and manages rapidly growing online gaming companies. The Group operates through subsidiaries with gaming licenses in 17 jurisdictions, offering casino, sportsbook, and other games in 12 countries across Europe and Central Asia.

Betsson's business model includes multiple brands such as Betsson, Betsafe, Nordicbet, and Casinoeuro. The company oversees the Group's strategic direction, corporate structure, governance, acquisitions, policies, risk management, internal audits, operational control, and financial communication. The company has over 2,700 employees.

The company operates in three primary segments: the Casino segment, contributing 72% of total sales in FY 24; the Sportsbook segment, accounting for 27%; and the Other segment, making up 1%. Geographically, revenue distribution is as follows: Nordics 16%, Western Europe 17%, CEECA 43%, Latin America 23%, and the rest of the world 1%.

Expansion in Italy and Poland

Betsson obtained a local license for Brazil in February 2025, covering casino and online sports betting, and launched its product offering in April. The company also launched a gaming site in Paraguay after securing a local license for online casino. Early in the Q1 25, Betsson acquired BetClic Italy to expand in the Italian market and completed the acquisition of shares in Polish subsidiary Bukmacherska, which offers sports betting. In addition, Betsson extended its shirt sponsorship with Boca Juniors in Argentina until 2028.

The company aims to outperform market profitably and sustainably, focusing on growth in existing markets, expansion into new markets, and B2B development. Betsson plans to grow organically and through acquisitions, leveraging its strong brand, proprietary technology, and platforms for quick market entry. Betsson’s gaming sites operate on the proprietary Techsson platform, which manages payments, customer information, and account management. The platform allows rapid adaptation to new market conditions and supports B2B offerings. Betsson uses AI and machine learning to enhance customer services, responsible gambling tools, and predictive functions, integrating these technologies into its sportsbook for improved customer experience.

Decent long-term performance

Betsson posted a revenue CAGR of 23.4% over FY 21-24, reaching SEK12.5bn in FY 24. Operating income increased at a higher CAGR of 31.9% to SEK3.6bn, with margins contracting by 517bp to 28.6% in FY 24. Net income therefore rose at a CAGR of 23.9% to SEK2.1bn in FY 24.

Net profit led to consistent FCF, with a cumulative FCF of SEK15.5bn over the last 3 years (FY 21-24). However, cash and cash equivalents dropped from SEK11.1bn to SEK3.5bn in FY 24. Total debt moderated from SEK13.6bn in FY 21 to SEK2.1bn as of end-FY 24. In addition, ROE also improved from 19.4% to 22.7% in FY 24.

In comparison, Evolution AB, a local peer, posted a higher revenue CAGR of 27.5% over FY 21-24, reaching SEK25.4bn. Operating income rose at a CAGR of 28.5% to SEK16.9bn in FY 24. Net income grew at a CAGR of 27.1%, reaching SEK14.3bn in FY 24.

Looking ahead, analysts anticipate revenue CAGR of 7.8%, reaching SEK15.7bn. Operating income is expected to grow at a CAGR of 9% to SEK4.6bn, with margins expanding by 96bp to 29.5%. Net income is expected to grow at a CAGR of 15.5% to SEK3.2bn. EPS is expected to increase from SEK14.9 in FY 24 to SEK22.5 in FY 27. In comparison, analysts estimate an operating income CAGR of 7.7% and a net profit CAGR of 2.3% for Evolution AB.

Stock delivers strong returns

Over the past 12 months, the company's stock has delivered impressive returns of about 55.9%. In comparison, Evolution AB delivered negative returns of about 42.9%. In addition, the company paid an annual dividend of SEK7.4 in FY 24, resulting in a dividend yield of 5.2%. Management expects to pay a dividend of SEK9 per share in FY 25.

The stock is currently trading at a P/E of 10.6x, based on the FY 25 estimated EPS of SEK17.4. This valuation is higher than its three-year historical average P/E of 8.6x but lower than Evolution AB’s P/E of 11.3x. In terms of EV/EBITDA, Betsson is trading at a multiple of 6x, based on the FY 25 estimated EBITDA of SEK3.8bn. This multiple is higher than its three-year historical average of 5.3x. However, lower than the Evolution AB’s EV/EBITDA multiple of 8.1x.

Betsson is generally liked by three analysts, with one having ‘Buy’ rating, one having ‘Outperform’ rating and one having ‘Hold’ rating for an average target price of SEK178.3. However, due to the stock's recent rally, the target price has already been reached. Any correction in the near term could provide a decent opportunity for investors to consider investment in the company.

Overall, Betsson has demonstrated strong performance and growth, with significant increases in revenue. The company has expanded its market presence through strategic acquisitions and new licenses, while also extending sponsorship agreements. Betsson's focus on sustainable and profitable growth, leveraging its proprietary technology and platforms, has positioned it well for future expansion.

However, Betsson navigates a landscape fraught with risks, from regulatory compliance challenges that could lead to fines or license revocations, to operational disruptions like technology failures and fraud. Financial uncertainties, including cash flow and tax changes, further complicate its path to sustained profitability.