Successful story to date but risky environment, JPM starts Evolution with 'neutral'

Evolution Petroleum

21/06/2023 10:43

** J.P.Morgan initiates coverage of Sweden's Evolution
 EVOG.ST  with "neutral", target price SEK 1,370, as risks
attached to the equity story cast a shadow over the online
gaming company's business development so far
        ** Evolution's revenue growth rate and margin/cash
profile is "impressive," but it operates in a risky environment,
the brokerage says 
    ** It questions the sustainability of Evolution's earnings
given benign competition up to now and elevated margins
    ** JPM flags the group's 60% exposure towards unregulated
markets, price/volume pressure risks should competition start to
intensify, and an increasing mix towards the U.S. where
operating costs are significantly higher
    ** It sees, though, Evolution well-positioned to further
benefit from a highly under-penetrated live casino segment,
which is expected to grow a solid double digit percentage in the
near-medium term
    ** Still, with the company being a pure online global B2B
player, the broker highlights its preference for B2C players in
the sector, and keeps "overweight" on Entain  ENT.L ,
Lottomatica  LTMC.MI 
    ** Out of 14 analysts that cover the Evolution share, ten
rate it "strong buy" or "buy", two rate "hold", and two rate
"sell"

 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))