Shares of GAN (GAN 1.33%), which is focused on the online betting market, fell roughly 10% within the first hour of trading on May 18. By around 2 p.m. EDT the stock had worked back to a loss of roughly 6.5%, but it was still clear that the company's post-market earnings release on May 17 did not please investors.
GAN had a busy first quarter in 2021, including some important business developments. For example, it completed the acquisition of Coolbet, establishing a business-to-consumer (B2C) business to complement its core business-to-business (B2B) operations. In the B2B segment, it completed five partner launches, bringing its year-to-date total to 10, which is more than in all of 2020. Basically, GAN has been growing in important ways across the casino and sports betting spaces.
All of this business development resulted in revenue of $27.8 million, up 263% from the same quarter in 2020. That was also notably better than the $24.5 million analysts had been expecting. However, GAN lost $0.11 per share in the first quarter, well off the $0.03 per share profit it saw in the year-ago period. Higher amortization costs, thanks to the Coolbet acquisition, and increased operating expenses were notable factors in the weak relative showing. Wall Street, meanwhile, was looking for a loss of $0.06 per share. Investors tend to look negatively upon material earnings misses, so it's not shocking that the stock sold off.
GAN is building a business in the hot online gambling and sports betting space. With just a year or so under its belt since its initial public offering, the stock has been on something of a roller-coaster ride. And with a roughly $650 million market cap, it's still a pretty small company. Conservative investors might want to watch GAN from the sidelines until there's more financial history to consider. More aggressive types, however, might find the gambling niche this company serves compelling enough for a deep dive. Just go in knowing that volatility is probably going to be the norm for some time at this growth-focused name.