Amaya Gaming Group Inc, has seen its stock price take a hit after a recent earnings miss, but the company’s long-term outlook was largely unaffected, making the stock now priced-to-buy for investors.
The Pointe-Claire-based company, which serves the online and mobile betting and physical gambling industries, looks poised to generate substantial growth through its services for casinos, while capitalizing on the increased popularity and adoption of online gambling in the United States.
Amaya carried out some significant acquisitions, buying up once high-flying Internet gambling companies such as casino gambling developer Cryptologic Ltd. and gambling software provider Chartwell Technology Inc.
Those companies had ridden the online poker and gaming craze, which collapsed when U.S. Congress banned online gambling in 2006.
Dozens of companies vanished, then in an unexpected turn American gambling law was changed and online gambling was legalized.
In 2013, virtual casinos went live in New Jersey. Of the seven casinos now online, Amaya is partnered with six of them, “which solidifies its presence within the U.S. online gambling market,” Ralph Garcea, an analyst with Global Maxfin Capital, said in a recent note.
Amaya’s biggest acquisition came in September, 2012, when the company announced the acquisition of casino supplier Cadillac Jack – a $177-million acquisition that more than doubled Amaya’s size.
Amaya’s fourth-quarter results fell short of consensus on both revenue and earnings, posting earnings per share of 6 cents compared to the average estimate of 9 cents. Investors bailed.
Last week the stock had fallen by 35 per cent from its March peak. It has recovered some of those losses since, but is still down by 27 per cent of its record high.
Investors got overly excited about increases in online gambling revenues in New Jersey. But Amaya’s growth is actually primarily driven by its “land-based” business – supplying machines and the software that runs them.
Due to the monopoly on online American services, it’s likely Amaya’s share prices will increase; the company is now perfect for long term investors who don’t want to pay a high initial share price.