Maxim Group analyst Jack Vander Aarde initiated coverage on TruGolf Holdings, Inc. (NASDAQ:TRUG) with a price forecast of $2.
TruGolf Holdings, formed from a business merger in the first quarter of 2024, has become a public company focused on golf technology and esports platforms.
The company aims to elevate its position in the market with an entirely revamped product suite and an aggressive franchise expansion model.
Given the following, Aarde projects strong multi-year growth that will unlock significant operating leverage.
This growth is anticipated to be driven by the rollout of next-generation paid software subscriptions, a significant hardware replacement sales cycle from its existing installed base, and substantial growth from an accelerated rollout of new domestic franchise centers, the analyst notes.
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The company may also see the potential for accelerated growth in the longer term through international franchise expansion, the analyst forecasts.
Since announcing its National Franchise model and collaboration with Franchise Well in the first half of 2024, TruGolf has already secured commitments for 120 U.S. franchise locations, which represents a potential revenue of over $24 million for bundled hardware and equipment.
Going ahead, Aarde projects this number to more than double within the next 12 months.
The analyst projects accelerating revenue growth, with an expected increase of 9% year-over-year in 2024, 20% year-over-year in 2025, and 30% year-over-year in 2026.
Aarde also sees nearly breakeven EBITDA in 2024, followed by positive EBITDA and free cash flow by 2025.
For the long term, the analyst forecasts a 10-year revenue compound annual growth rate of 20% and EBITDA margins of 20%.
TruGolf ended the third quarter of 2024 with $7.5 million in cash. The analyst suggests that its capital is sufficient to support existing operations for at least 12 months.
However, TruGolf may explore strategic growth capital opportunities to accelerate its franchise expansion, Aarde notes.
Price Action: TRUG shares are trading higher by 19.7% to $0.4423 at last check Thursday.
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