Investors hit jackpot with Amaya stock
UP 235% IN 5 MONTHS
Amaya Gaming Group Corp. has been a pretty solid play for investors since debuting at $1 on the Canadian market in July 2010.
But the stock now looks more like a jackpot after the company’s blockbuster purchase of the PokerStars and Full Tilt gaming sites in midJune added two well-known online services to its product and services offerings.
Over the past five months, the stock has climbed a whopping 235% to easily lead all members of the S&P/TSX composite index, closing Tuesday at $37.34. Better yet, it is expected to go even higher in the months ahead — albeit at a slightly slower pace.
“Amaya will continue to trade based on the expectations of its PokerStars and Full Tilt assets, as the company expands its offering of online poker and casino games around the world, and attempts to further penetrate the liberalizing U.S. online gaming market,” said Neil Linsdell, an analyst at Industrial Alliance Securities Inc., in a note to clients. He increased his target on the stock to $44 from $31 and boosted his rating to a buy, noting the company’s better-than-expected profitability and cash flow during its third quarter.
Amaya last Friday reported adjusted EBITDA of $108.4-million, versus the average estimate of $91.6-million, and adjusted earnings per share of 43¢, which was nearly double analysts’ average expectation of 22¢. The company also reiterated its 2014 guidance, with results expected to be at the higher end of the range for revenue of $669-million to $715-million, and adjusted EBITDA of $265-million to $285-million.
Mr. Linsdell said Amaya’s third quarter benefited from incorporating two months of revenue from Poker Stars and Full Tilt and expects the company to continue building out these two platforms in 2015. In particular, he noted the company now offers casino services and intends to launch sportsbook play some time in the first half of 2015.
“The company has suggested that up to half its existing active players are playing casino and/or sportsbook on other sites and that by providing these verticals on PokerStars and Full Tilt, Amaya gives players the opportunity to combine loyalty points on a single individual platform, one they already trust,” Mr. Linsdell said.
Most other analysts covering Amaya are equally bullish on the stock. Of the seven who cover it, six have buy ratings, and the average 12-month price target is $42.33, representing potential upside of 13.4% in the next year.
Eyal Ofir, analyst at Clarus Securities, raised his price target of the stock to $45 from $42 on Monday, while reiterating his buy rating. He said thirdquarter results were impressive overall, but one of the key take-aways for him was Full Tilt’s casino launch, which drove more than 30% of poker players to play casino, with a subsequent increase in deposits “with minimal impact to poker.”
He believes another major catalyst for the stock could be Amaya’s growing presence in California. The company has been adding partnerships there over the past few months in anticipation of new legislation being passed that would make online poker legal in the state.