Codere Online: While the Q4 Outperformance Was Anticipated, the Key Development Is the Shift in Profitability

Codere Online's Financial Update: Revenue Growth Overshadowed by Profit Decline

Codere Online reported fourth-quarter net gaming revenue of €60.7 million, marking a 15% increase compared to the previous year—a result that likely matched or surpassed market expectations. However, the focus quickly shifted to the bottom line, as the company recorded a net loss of €1.8 million for 2025, a sharp contrast to the €3.9 million net profit achieved in 2024. This reversal in profitability has become the central narrative, taking precedence over the revenue gains.

Despite the strong revenue figures, Codere Online's share price remained largely unchanged, closing at €8.10 with a slight 0.12% decline. This muted reaction reflects a classic "sell the news" scenario, where positive results were already anticipated and factored into the stock price. The unexpected downturn in net income has now set a new benchmark for investor expectations, shifting attention from growth to profitability concerns.

Looking ahead to 2026, the company projects net gaming revenue between €235 million and €245 million, with adjusted EBITDA expected to fall within the €15 million to €20 million range. This guidance suggests a more cautious approach, indicating management's recognition that the period of rapid growth may be ending and that restoring profitability is now the priority. For investors, the message is clear: while revenue growth was anticipated, the decline in earnings is now the key issue.

2026 Outlook: A New Baseline for Expectations

The guidance for 2026 establishes a fresh standard for the market. Codere Online is forecasting net gaming revenue of €235-245 million and adjusted EBITDA of €15-20 million. While these targets represent an improvement over 2025's €224.1 million in revenue and €13.8 million in EBITDA, the main story lies in the implied profitability shift.

This new guidance marks a strategic pivot. Management is moving away from prioritizing sheer volume and is now emphasizing profitability and return on investment, particularly in key markets like Mexico and Spain. This change comes in direct response to the net loss in 2025, a notable departure from the previous year's profit. The company is signaling a move toward more measured growth, acknowledging that the era of easy expansion may be over.

As a result, expectations for profitability have been recalibrated. The projected adjusted EBITDA margin for 2026 is approximately 6-8%, which is significantly lower than the roughly 11% margin achieved in the fourth quarter of 2025—a period that itself marked a substantial improvement from the prior year. The company is making it clear that the high margins seen recently are unlikely to continue, and the new guidance represents a reset rather than ongoing momentum.

This more conservative outlook is consistent with recent analyst opinions. For example, Stifel recently downgraded the stock to Hold and reduced its price target, citing concerns that the recent rally had built in too much optimism. The updated guidance offers a more grounded, albeit less thrilling, path forward. For shareholders, the gap between expectations and reality is narrowing, and the market must now assess whether this new focus on sustainable margins and payback is the beginning of a stable phase or if further disappointments lie ahead.

Key Drivers and Challenges: Navigating Toward a New Market Consensus

The stock's current lack of momentum centers on a crucial question: can management deliver on its revised guidance? Achieving a new consensus will depend on effective execution, prudent capital allocation, and evidence of a return to profitability.

• Execution in Mexico: The primary catalyst for the stock will be how well the company implements its 2026 strategy, especially in Mexico. The guidance specifically highlights tax challenges as a risk, referencing the recent tax increase in Mexico that contributed to the Stifel downgrade. Although Mexico posted a 31% revenue increase last quarter, sustaining this growth amid new tax pressures will be critical. The market will closely monitor whether Codere Online can maintain its momentum and achieve its financial targets in this environment.
• Share Buyback Program: As of February 25, the company had repurchased approximately 391,000 shares for about $2.7 million. While this move returns capital to shareholders and slightly offsets the €1.8 million net loss, its impact is relatively minor and serves more as a symbolic gesture than a significant boost to earnings.
• Upcoming Earnings Report: The most significant near-term event will be the release of the first-quarter 2026 results. This report will serve as the initial test of the company's new direction. Investors are looking for clear signs that Codere Online is regaining the operational discipline needed to achieve its adjusted EBITDA goals. A strong showing could help restore confidence, while a disappointing result would reinforce the cautious outlook and likely keep the stock in its current holding pattern.

In summary, the company's future performance hinges on its ability to prove that the strategic reset is effective. Success in Mexico, a return to profitability, and disciplined capital management are essential steps toward closing the gap between the current share price and a more stable valuation. Until these objectives are met, the stock is likely to remain in a wait-and-see mode, with investors looking for tangible progress before re-evaluating their expectations.