What happened
Shares of online poker company Stars Group Inc (TSG) fell as much as 16% in trading Monday after the company reported second-quarter 2018 results. At 3:50 p.m. EDT, shares were still down 10.7% on the day.
So what
Revenue jumped 34.8% in the quarter to $411.5 million, and net loss was $154.8 million, or $1.01 per share. On an adjusted basis, which pulls out one-time events, earnings were up 14.9% versus a year ago to $131.0 million, or $0.60 per share.
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There were a couple of big flaws in the quarter from an operating perspective. The biggest is that adjusted EBITDA margin fell 910 basis points to 40.9%. Long-term, investors would like to see margins rise, especially after a business like online betting is consolidated, and that's not what's going on at Stars Group today.
Now what
There aren't any huge flaws in today's results, but the market had higher expectations. What investors should watch is Stars' development in sports betting in the U.S., where it should be a big player, and the company's long-term margin trend. If Stars can win a big share of the sports betting market and improve margins, this could be a great buying opportunity for investors.
