Why Gambling.com Stock Just Plummeted 15%

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What happened

Shares of Gambling.com Group (NASDAQ:GAMB) fell hard in morning trading Thursday after the marketing specialist for the online gambling industry reported third-quarter earnings before the market opened. 

The stock was down 17.7% at 12:07 p.m. ET. The stock market as a whole, however, also opened lower, with the Dow Jones Industrial Average falling more than 200 points (about 0.8%) shortly after the open. By early afternoon, however, the major indexes had largely bounced back from their earlier declines.

Image source: Getty Images.

So what

Gambling.com’s earnings report was actually quite good, though its revenue of $10.1 million fell just shy of the $10.4 million consensus forecast. Earnings of $0.10 per share handily beat Wall Street’s estimates of $0.07 per share.

CFO Elias Mark asserted that the marketing company‘s sluggish 37% revenue growth and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 34% were “healthy despite a seasonally slow quarter.”

He noted the company had previously warned that both metrics could deviate from their 40% target rates as it invested in the business, pursued mergers and acquisitions, and incurred costs associated with going public.

Gambling.com’s IPO was held in late July after it priced its shares at $8. Even after Thursday’s sharp decline, the stock is up by more than 50% from there, and has nearly doubled from the low point it touched in mid-August.

Now what

Mark said he foresees Gambling.com exceeding its 40% target rates for revenue growth and adjusted EBITDA margin for the full year.

The company’s strong relative performance last quarter bodes well for the future, and given the gains that the stock has made this year, Thursday’s sell-off could just be a case of profit-taking. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.