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Why the Jumbo share price fell 8% to a 52-week low today

online lottery shares

The worst performer on the ASX 200 index on Thursday has been the Jumbo Interactive Ltd (ASX: JIN) share price.

In afternoon trade the online lottery ticket seller’s shares were down as much as 8% to a 52-week low of $9.86.

This latest decline means that Jumbo’s shares are now down by over a third since the turn of the year.

Why is the Jumbo share price sinking lower?

Today’s decline can be partly attributed to Jumbo’s shares trading ex-dividend for its interim dividend this morning.

It will be paying eligible shareholders a fully franked 18.5 cents per share dividend in around two weeks on March 20.

In addition to this, the Jumbo share price has come under significant selling pressure in recent months due to its slowing growth.

During the first half of FY 2020, Jumbo reported total transaction value (TTV) of $185.3 million and revenue of $37.6 million. This represented a 25% and 23% increase, respectively, on the prior corresponding period.

Whilst this was impressive, and what the market has become accustomed to from Jumbo, its bottom line growth wasn’t as strong.

Due partly to a 36.7% increase in total expenses compared to the prior corresponding period, Jumbo’s net profit after tax came in 14% higher at $14.4 million. Diluted earnings per share rose 11% to 23 cents.

The increase in its expenses was largely the result of the company investing heavily to drive long-term ticket and revenue growth as part of its “billion dollar vision.” This is Jumbo’s goal of growing the business to the point of processing $1 billion of tickets through its software platform by 2022.

Should you buy the dip?

Whilst it is difficult to know if the Jumbo share price has bottomed now, I think its shares are trading at an attractive level for investors that are willing to make a long-term investment.

If Jumbo delivers on its billion dollar vision it will lead to a significant lift its revenue over the next couple of years. This should then support above-average earnings growth once the company’s increased investment in its growth eases.

Overall, I think it would be a good option in the gambling and gaming space alongside Aristocrat Leisure Limited (ASX: ALL) and Pointsbet Holdings Ltd (ASX: PBH).

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Jumbo Interactive Limited and Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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