On Tuesday, Evolution AB (EVO:SS) (OTC: EVGGF) saw its price target increased by Citi to SEK1,570.00, up from the previous SEK1,500.00, while the firm maintained a Buy rating on the stock. The adjustment follows Evolution's third-quarter results for 2024, leading to revised forecasts by the analyst.
The updated financial expectations for Evolution AB indicate a change in revenue projections for fiscal years 2024 and 2025, with an increase of 3% and 1%, respectively. These adjustments account for regional performance, with an upgrade in revenue expectations for North America and a downgrade for Asia.
Additionally, the third-quarter revenue was positively influenced by a reduced earnout liability, which, if excluded, would result in a neutral growth forecast for FY24.
Citi has also modified its margin expectations for Evolution AB, reducing the FY24 estimated EBITDA margin to 68.5%, slightly below the company's guidance range of 69-71%. This figure was previously set at 69.0%. For the fourth quarter of 2024, the EBITDA margin is forecasted at 68.7%, consistent with the third-quarter margin, which was 68.5% after adjusting for the earnout liability reduction.
The firm's EBITDA and EPS forecasts for FY24 and FY25 have also been updated, showing a 3% increase and a 1% decrease, respectively. Excluding the impact of the reduced earnout liability, the EBITDA and EPS for FY24 would see a 2% decrease.
Citi anticipates that the weaker margin guidance, along with challenges in Asia and Georgia, may restrain the stock's price growth until Evolution can demonstrate improved momentum.
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