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  • September stock market sweep: Gambling stocks slump led by 888, GAN and XLMedia
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September proved to be a challenging month for the industry, as nearly all the gambling stocks on our watch list endured substantial declines.

Some companies, unfortunately, fared even worse than others, with 888, GAN and XLMedia emerging as our top underperformers during this tumultuous month.

888

888, a regular in this feature, faced the most significant setback among operators, witnessing a substantial 24% drop in its stock value.

The company recently cautioned investors about their Q3 2023 performance, projecting a 10% year-over-year decrease in revenue to £400m.

This warning closely followed a similar note from Entain, which revealed its intention to expedite a market review and operational streamlining in light of Q3 2023 results that fell below expectations.

Entain’s stock value also experienced a notable decline of 21% in September.

Both companies attributed their challenges to a combination of factors, including the impact of sports results and the effects of newly implemented safer gambling reforms in the UK. 

888 also noted an “ongoing significant impact from compliance changes implemented in dotcom markets”. 

The business made major changes to its policies in these countries after launching an internal probe in January into the checks it performed on Middle Eastern high rollers.

888 executive chair Lord Mendelsohn said: “We are making significant strides to improve the quality and long-term sustainability of our revenues, but performance in Q3 has been below our expectations, and this means we now expect to end the year with EBITDA below our prior expectation.”

With Entain and 888 both posting warnings about Q3 performance, investors are monitoring rival Flutter Entertainment, which has shown no signs yet of making a similar announcement.

GAN

In the supplier category, GAN experienced a challenging month in September, with its stock declining by 24%. 

Starting the month at $1.44, it ended at $1.16 on 29 September, the final trading day of the month.

The resignation of long-serving CEO Dermot Smurfit and the appointment of Seamus McGill as interim CEO on 27 September did provide a brief boost of approximately 20% to the stock. 

However, GAN investors have faced better times in the past, with the stock losing nearly 20% over the last six months and nearly 50% over the past year. 

Notably, the stock reached its highest point on 8 February 2021, at $30.45.

Earlier this year, GAN initiated a comprehensive company-wide strategic review process aimed at accelerating its path to profitability and achieving a more appealing return profile.

When presenting GAN’s Q2 2023 results, Smurfit said the company had received indications of interest from prospective bidders interested in acquiring the business. 

He added that a special board committee comprised of non-executive directors was evaluating the proposals, although no agreement has been reached at this time.

The latest quarter saw GAN report revenue of $33.8m, which represented a decrease of $1.2m compared to the same period of last year.

It’s fair to assume that investors are eagerly awaiting further updates on the strategic review as GAN navigates these changes and challenges.

XLMedia 

The affiliate with the biggest stock loss in September was XLMedia, down 29%. 

Over the past six months, its shares have plummeted by nearly 40%, and it has seen a decline of approximately 60% over the past year.

In September, XLMedia’s stock opened at £11.63 and remained relatively stable for most of the month. 

However, it began to decline following the ban imposed by the UK Advertising Standards Authority (ASA) on an XLMedia Instagram ad featuring Manchester United’s Mason Mount.

What might have raised more concerns among investors was XLMedia’s failure to respond to any of the ASA’s inquiries regarding the banned advertisement. 

The regulator expressed its “concern” over the lack of response and the apparent disregard for the rules.

Then, on 29 September, XLMedia’s shares experienced another decline after the company reported a 34% revenue decline for H1 2023.

XLMedia had previously disclosed its H1 results in July, but opted for a repeat presentation in September. 

This time, the presentation featured only the CEO and CFO discussing the results without a Q&A session.

This resulted in another drop of nearly 6% in the company’s shares.

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