ZEAL Network SE Gears Up for Substantial Growth, According to NuWays AG Research

ZEAL Network SE, as analyzed by NuWays AG, is poised for a new chapter in growth, primarily driven by enhanced monetization in its Lottery and Games businesses from fiscal year 2024 onwards. NuWays AG’s analysis predicts a 25% sales growth for the current year, with a compound annual growth rate (CAGR) of 17% from 2023 to 2026. This projection bases on the expectation of increased lottery sales growth, as ZEAL Network plans to significantly uplift its billings margin, thus improving its gross margin to over 15% starting in the second half of 2024.

Fulfilling this target involves introducing a new social lottery and directing customer behavior towards higher margin lottery products. Additionally, the company aims to implement selective service fees, leveraging the loyalty and price insensitivity of its customer base to enhance revenue. NuWays AG also forecasts operating leverage to significantly boost ZEAL’s EBITDA margins from a flat 28% in fiscal year 2024 to 33% by the following year, benefiting from the full rollout of the Games portfolio.

The first quarter of 2024 witnessed a strong start for ZEAL, with high user activity driven by four peaking jackpots, resulting in approximately 300-400k new registrations. This momentum indicates a promising outlook, contributing to the research firm’s decision to reaffirm its BUY recommendation for ZEAL Network with a target price of €51, underpinned by a comprehensive Discounted Cash Flow (DCF) analysis.