Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space. 

SECTOR NEWS: 

Shares of Gan Limited (GAN) were down as much as 7% on Friday after the company reported Q4 results that missed analyst expectations on Thursday night. The company reported losses per share of (26c), versus analyst's consensus estimate of (6c). The company's Q4 revenue of $8.9M came in nearly $2M behind Street consensus.

Dermot Smurfit, CEO of Gan stated: "2020 was a highly successful, foundation-building year for GAN. We expanded our top-line, doubled our new client launches, signed numerous new customers that we believe will support stable and growing recurring revenue, and rounded out our product portfolio through multiple new content partnerships and the critical acquisition of Coolbet. Our annual revenue increased 17% in 2020, but the key recurring components of that, our U.S. RMiG and Simulated offerings, saw revenue growth of 92% and 77%, respectively. We also invested in our infrastructure and have fully converted to U.S. GAAP during the fourth quarter, which completed our journey to becoming a public company listed and based in the U.S. Most importantly, we filled a significant need in our product offering through Coolbet's best-in-class sportsbook engine, which positions Gan as a full-service B2B solution for real money gaming in the U.S. and as a vertically integrated B2C player in select international markets."

On the other hand, GAN provided EPS and revenue guidance for Q1, and FY21 well above the Street. CFO Karen Flores cited the CoolBet acquisition, among other factors, for the optimistic projections. Flores said: "Our first quarter has started off very strong across all of our business lines. This should support strong growth in 2021 and we expect to almost treble our top-line performance, inclusive of strong organic growth and Coolbet's contribution. We also expect to drive operating leverage that will yield stronger profitability results year-over-year. We remain confident that we will continue to onboard new customers as well as deepen our relationship with our existing customers, and we look forward to the launch of new states in 2021 to further support our growth trajectory. In the meantime, we are acutely focused on the integration of Coolbet to round out our B2B offering. We maintain a strong financial position and have a differentiated IP portfolio and management team that will continue to support and drive our multiprong growth strategy."

Craig-Hallum analyst Ryan Sigdahl downgraded Gan Limited to Hold from Buy with a price target of $20, down from $28. Sigdahl believes a rising tide is lifting all boats in the online gambling sector, and while the analyst is a big supporter of the opportunity and investment theme, he thinks Gan has outsized risk over the medium-term relative to others, the analyst tells investors in a research note.

In a regulatory filing, Bally's (BALY) disclosed that it had reached an agreement in principle on key terms of a possible combination of Bally's and Gamesys Group plc (JKPTF) pursuant to which Bally's would acquire the entire issued and to be issued ordinary share capital of Gamesys. The possible combination would be implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006. Under the terms of the possible combination, Gamesys shareholders would be entitled to receive 1,850 pence in cash for each share of Gamesys or, under a share alternative, Gamesys shareholders would be able to elect to receive newly issued common shares of Bally's in lieu of part or all of the cash consideration to which they would be entitled to elect to receive under the Possible Combination at an exchange ratio of 0.343 new Bally's common shares for each Gamesys share.

Jefferies analyst James Wheatcroft said that he expects "this combination to happen." Adding market access from Bally's 12 land-based assets covering 7 states, plus its recently acquired online sports platform, to Gamesys' iGaming platform and digital expertise "looks to be an interesting combination," said Wheatcroft, who has a Buy rating and 2,150 pence price target on Gamesys shares. Stifel analyst Steven Wieczynski believes the deal would provide Bally's with "a leading iGaming tech-stack" to help carve out its role in the "burgeoning" U.S. online gaming market. After the announcement, Stifel analyst Steven Wieczynski raised the firm's price target on Bally's to $75 from $70. His higher price target reflects his higher conviction on the company's long-term sports betting and iGaming opportunity, Wieczynski noted.

LAS VEGAS STRIP RECOVERY: 

Nevada reported February Las Vegas Strip gaming win was down 41.55% to $348.46M versus last year's $897.52M. This figure marks a marginal improvement from the down 44% in January and down 51% in December. Vegas capacity restrictions were lifted from 25% to 35% on February 15 and March is expected to show further improvement given capacity restrictions were raised to 50% during the month.

Macquarie analyst Chad Beynon told investors in a research note that he is seeing encouraging signs of pent-up demand for March Madness, while noting sports revenues fell 16% in Nevada and 40% in Las Vegas, consistent with industry trends for states that have reported. The analyst noted that operators seem to be turning more optimistic on Vegas trends, where occupancy is climbing and recent trends are matching or even going beyond healthier trends witnessed in October. According to Beynon, the firm favors MGM Resorts (MGM) and Caesars (CZR), which was just added to the S&P 500, for Strip recovery and Golden Entertainment (GDEN) and Red Rock Resorts (RRR) for locals.

ANALYST COMMENTARY

On Monday, Beynon initiated coverage of Score Media and Gaming (SCR) with an Outperform rating and $44 price target. The company is is well positioned to capitalize on the "burgeoning" North American online sports betting and internet gaming market given its "unique" offering, popular brand and loyal userbase, Beynon told investors in a research note. The analyst forecasts 70% revenue revenue growth over the next three years, driven by Canada, new market access, state launches, ramp of existing states and potential acquisitions.

Deutsche Bank analyst Carlo Santarelli raised the firm's price target on Boyd Gaming to $67 from $65 and maintained a Buy rating on the shares after meeting with management. The analyst says Boyd's "margin story" outpaces most of its regional peers. Santarelli adds that while largely reflected in estimates, his confidence in the execution of the strategy and the stock's relative valuation leave him comfortable staying bullish.

Goldman Sachs analyst Stephen Grambling raised the firm's price target on Penn National to $153 from $139 and kept a Buy rating on the shares after increasing his sports betting and iGaming total addressable market projections based on the latest view from the firm's economists. Grambling expects a combination of favorable legislation and consumer adoption to drive growth in U.S. online sports betting and internet gambling from $900M and $1.5B markets, respectively, to $39B and $14B markets in 2033, he told investors. Grambling also raised the price target on DraftKings to $87 from $79 and reiterated a Buy rating on the shares after increasing his sports betting and iGaming total addressable market projections based on the latest view from the firm's economists. Grambling expects a combination of favorable legislation and consumer adoption to drive growth in U.S. online sports betting and internet gambling from $900M and $1.5B markets, respectively, today to $39B and $14B markets in 2033, he told investors in a research note. Lastly, Grambling raised the firm's price target on Caesars to $95 from $92 and kept a Neutral rating on the shares.

Benchmark analyst Mike Hickey lowered the firm's price target on Golden Nugget Online to $24 from $27 and maintained a Buy rating on the shares after the company raised revenue guidance for FY21 and signaled an accelerated marketing spend plan and investment in new markets. While he has reduced his near-term profit assumptions, leading to the lowered price target, Hickey said "ambitious" online casino market expectations should translate into a compelling long-term growth profile. However, strong execution in new markets remains imperative and he is not convinced the early success Golden Nugget has had in New Jersey will translate to new markets as competition has risen and "they have few retail casinos," the analyst added.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: 

Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), Score Media (SCR), William Hill (WIMHY) and Wynn Resorts (WYNN).