TheScore bets on NFL debut of fantasy app for stock rebound
TORONTO - TheScore Inc. is betting a new fantasy app the Canadian sports news provider will unveil during the National Football League season will rejuvenate a stock that has lost half its value since April.
"It's grossly undervalued," Chief Executive Officer John Levy said in a phone interview Aug. 27. The app, originally called Swoopt, will be renamed and launched early in the NFL season, which starts Sept. 10, Levy said. It will focus on daily results, tempting users to check in multiple times a day. "I know what we're building, I know what the future holds."
Fifty-seven million people play fantasy sports games in North America, up almost 40 percent from last year, according to a study released in June by the Fantasy Sports Trade Association. Most of those are playing season-long games, while only 2 million to 3 million play daily games like the one TheScore is set to offer, according to Levy. That means the market is primed for growth, he said.
Instead of spending a huge sum on advertising to win new users like rivals including U.S. firms FanDuel Inc. and DraftKings Inc., TheScore, based in Toronto, already has a pool of millions of sports fans using its core news app that could be courted for the new product, Levy said.
"We don't have to spend all these humongous dollars in marketing, we know people who love sports, they've got our app,'' he said. The app will include cash prizes, charge a fee to play and will focus on small groups of friends or co-workers who want to compete against each other to predict which players and teams will win across all major sports.
TheScore's original news app is known for giving users the ability to customize their news feeds to choose exactly which players, leagues and teams they want to follow. The company plans to make it easy to transfer those preferences into the fantasy app, Levy said.
TheScore's stock has slumped about 50 percent since April to 43 Canadian cents for a market value of C$127 million ($96 million) as user growth slowed and small-cap stocks sold off. Average monthly users grew 18 percent to 10.5 million in the company's fiscal third quarter ended May 31, down from growth of 33 percent the year before.
When TheScore bought the app last year, the stock jumped 19 percent. Unveiling a revamped version of the fantasy app and laying out a plan for how it will make money could be the news investors are waiting for, Vahan Ajamian, a Toronto-based analyst with Beacon Securities, said in a phone interview.
"Depending on how they rebrand, and how it's received in the market the rebranding itself could be a catalyst," Ajamian, who rates the stock a buy, said in a phone interview.
Still, TheScore needs to keep adding to its roster of products, which also includes an app focused on competitive video gaming, to keep increasing the number of users it can offer to advertisers, Ajamian said.
"You're in a situation where the user growth is slowing," Ajamian said.
Competition is also intensifying as Yahoo Inc., CBS and Canadian online gambling company Amaya Inc. are all stepping up their presence in daily fantasy sports games, Nikhil Thadani, an analyst with Mackie Research Capital Corp. in Toronto, said by phone.
The company's product will be unique enough to set it apart from the growing field of competitors, Levy said, who is the biggest shareholder with a 19 percent stake, according to data compiled by Bloomberg. Rogers Communications Inc. bought TheScore's TV channel in 2012 and spun out the digital properties into a new public company.
Levy also said he's not concerned with the slow down in growth of the company's user base.
"Are we going to see continued serious growth from the app itself and from all the other avenues and platforms that we have?" he said. "The answer is yes."