Shares of GAN Limited (NASDAQ:GAN) fell as much as 20.5% in trading Friday after reporting second-quarter 2020 results. Shares pared some of those losses as the day wore on and were down 16.9% at 2:00 p.m. EDT, which was still a big loss for the day.
Second-quarter revenue jumped 99% to $8.3 million as U.S. operations more than doubled. But net loss was $8.8 million, up from a $1.9 million loss a year ago, and the $0.33 loss per share was well above the one-cent loss that analysts expected.
The loss was driven by a huge jump in administrative expenses from $2.7 million a year ago to $13.7 million last quarter. Management said that $8.8 million of that was share-based compensation and expenses related to the company's IPO.
Neither the growth or the expenses were a huge surprise, but the company's outlook may have been. Management simply reiterated full-year revenue guidance of $37 million to $39 million, but investors may have been looking for more. A recent run-up in shares has been the result of bullish sentiment from analysts, positive online gambling results in some states, and hopes that the return of professional sports while the pandemic is still happening will push people to gamble more online. But management didn't increase guidance and that has to be a little disappointing.
There's no question that GAN Limited is a growth stock by any measure after these results. The questions about the stock are more around how much the company should be worth. GAN's market cap is currently around $600 million, which is more than 15 times expected revenue. That's expensive even for a high potential company and with dozens of rivals in the online gambling space, there may not be as big a piece of the pie as some hoped for GAN Limited.