Solid competitive position, cash generation and technicals support defying weakness for a rebound
Despite recent growth deceleration, EVO's dominant position in live casino, stable margins, and strong cash generation present a compelling opportunity amidst a sharp stock pullback. With the price now at a key support level and favorable technical indicators, we anticipate a +20% rebound.
Although growth has decelerated somewhat in recent quarters (36% in FY'22, 24% in FY'23, and 17% in Q1'24), EVO continues to show a near unassailable lead in live casino. With stable margins (~70%) and cash generation, and a 12-month forward P/E of 18x, this justifies an opportunistic view as the stock has pulled back so sharply in a short time.
Since March, the price has pulled back 20% and is now down to the lower part of the support area SEK 1,110-1,140. This also constitutes a 61.8% Fib retracement of the run from October 2023 to March 2024.
Expecting a short term bottom here, we go long, trageting the upper end of the the falling trendline and resistance level at SEK 1,310-1,360, and set our stop right below the rising trend lines at a flat SEK 1,000. This constitutes a 10% downside and a 18-22% upside.
