Maxim Group analyst Jack Vander Aarde initiated coverage on NIP Group Inc. NIPG with a Buy rating and price forecast of $12.
Following its IPO in July, NIP Group has become a diversified company in esports, entertainment, and technology, with in-house professional esports teams like Ninjas in Pyjamas and eStar, as well as talent management and event production, Aarde writes.
Per the analyst, NIP Group aims to capture higher-margin growth opportunities by expanding into new verticals with synergies, broadening its geographic reach, and focusing on mergers and acquisitions and innovation.
The company’s Events segment saw a significant surge of 377% year-over-year growth in revenue during the first half of 2024, reaching $8.7 million.
Aarde writes that this growth is expected to continue rapidly, driven by its expansion from the Hubei province to all of China, the inclusion of anime conventions and music festivals in its events portfolio, and increased engagement from governments, state-owned enterprises, and large corporations.
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NIP Group anticipates that recent changes in its Talent Management segment will improve its historically negative gross margin, ultimately leading to higher-margin revenues by 2025.
The acquisition of “Young Will,” which has over 115 million followers, is expected to contribute to this improvement by targeting a younger demographic with short-form content.
The company is also close to finalizing an agreement with the Abu Dhabi Investment Office to establish its central hub for the Middle East and North Africa region, the analyst adds. This deal will include a four-year, $10 million investment aimed at supporting economic development in the region.
The analyst projects the company’s revenue growth will accelerate from a 6% year-over-year increase in 2024 to 14% in 2025, and 30% in 2026, with breakeven EBITDA.
The analyst also sees a seven-year compound annual growth rate (CAGR) of 35% in revenue and long-term EBITDA margins to reach 18%.
As of the second quarter of 2024, NIP Group had $6.8 million in cash and raised over $20 million from its IPO in July.
The company is likely to remain active in the capital markets, pursuing more M&A, joint ventures, and investments in organic growth, Aarde adds.
Price Action: NIPG shares are trading higher by 0.43% to $7.08 at last check Thursday.
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