ZEAL Network's (ETR:TIMA) Promising Earnings May Rest On Soft Foundations

Ladies and gentlemen, let me tell you something: ZEAL Network SE (ETR:TIMA) just dropped a bombshell of an earnings report, and the market didn't even blink! WHAT?!?! You heard it right. The company's earnings report for 2024 was a blockbuster, but the stock price didn't budge. Why? Because there's a catch, and it's a big one.

First, let's talk about the good stuff. ZEAL Network's revenue skyrocketed by 64% to €191.3 million, and net income jumped a whopping 354% to €58.4 million. That's right, folks! The company's profit margin soared to 31%, up from 11% the previous year. Earnings per share (EPS) also surged to €2.70, up from €0.59. This is the kind of growth that makes your heart race!

But here's the kicker: ZEAL Network received a tax benefit of €9.2 million. Now, don't get me wrong, a tax benefit is great, but it's a one-time thing. It's like winning the lottery—it feels amazing, but it's not something you can count on every year. This tax benefit temporarily boosted the company's statutory profit, but it's not a sustainable source of earnings. The market knows this, and that's why the stock price didn't move.



So, what does this mean for ZEAL Network's future? Well, the company has some serious work to do if it wants to maintain this level of profitability. They need to focus on their core business, drive revenue growth, and invest in strategic acquisitions and product innovations. The launch of the Tamasolozo product was a huge success, generating over €5 million in revenue and attracting a younger, more female demographic. This is the kind of innovation that can keep the company on top.

But here's the thing: ZEAL Network's personnel costs increased by about 40%, and direct operating costs rose by 54%. These are significant increases, and they need to be managed carefully. The company has implemented price optimization measures and expects a full-year effect in 2025. They're also focusing on cost management and operational efficiency. This is crucial if they want to maintain profitability while continuing to invest in growth.

Now, let me tell you something else: ZEAL Network's EPS growth over the last three years has been very impressive. This indicates a strong underlying earnings power. The company's strategic acquisitions, such as the proposed acquisition of Lotto24 AG, aim to expand its market share and strengthen its position in the online lottery brokerage business in Germany. These acquisitions, along with other strategic moves, can drive further growth and expansion, contributing to the company's potential as a multi-bagger.

But here's the bottom line: ZEAL Network's promising earnings may rest on soft foundations. The tax benefit is a one-time thing, and the company needs to focus on sustainable growth. They need to manage their costs carefully and continue to innovate. If they can do that, they have the potential to be a real winner. But if they can't, they could be in for a rough ride.

So, what do you do? You need to keep an eye on ZEAL Network. Watch their next earnings report closely. See if they can maintain this level of growth without the tax benefit. And remember, this is a company with a lot of potential, but it's also a company with some serious challenges. You need to be smart about this one. Don't just jump in because of the hype. Do your research, and make an informed decision. This is your money, and you need to protect it.

BOO-YAH! That's the truth about ZEAL Network SE. Stay tuned for more, and remember: the market is a beast, and you need to be ready for anything.