Noah Zivitz

Managing Editor, BNN Bloomberg

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Enthusiast Gaming Holdings Inc., whose shares have lost more than one-third of their value this year alone, is at an “inflection point”, said a Bay Street analyst who has a bullish view on the battered stock.

"We view much better than forecast [first-quarter] results as an inflection point that showcases both the growing importance of the global gaming ecosystem and early earnings potential of the company," wrote RBC Capital Markets Analyst Drew McReynolds in a note to clients Monday. He has an outperform (the equivalent of buy) recommendation on Enthusiast, and he raised his price target to $8.00 per share from $7.00.

Enthusiast, which lays claim to more than 300 million monthly viewers across its portfolio of gaming platforms, reported first-quarter revenue that surged 57 per cent year-over-year to $47.2 million. Analysts, on average, were expecting $41.4 million in revenue, according to estimates tracked by Bloomberg. While operating expenses jumped to almost $25 million in the quarter from nearly $19 million a year earlier amid a spike in salaries and wages, Enthusiast narrowed its first-quarter net loss to $11.4 million from $13.6 million.

"Management sees a significant opportunity to further aggregate and monetize the still highly fragmented fan experience segment of a broader gaming ecosystem. We continue to view current levels as an attractive and timely entry point," McReynolds wrote in his report. He thinks Enthusiast is on track to be sustainably profitable (on an earnings before interest, taxes, depreciation, and amortization basis) by the end of this year.

Through the close of trading Monday, Enthusiast shares were down 36 per cent year-to-date on the Toronto Stock Exchange; from their peak in April 2021, the stock has tumbled 78 per cent. The seven analysts tracked by Bloomberg who cover the stock all have buy recommendations, with a consensus 12-month price target of $8.86, suggesting 273.8 per cent potential upside.