Capitalize on the iGaming Revolution With Golden Nugget On-line Gaming

A man looking at a computer with poker chips on the screen.

Particular function acquisition firms (SPAC) had a banner 12 months in 2020, and are poised to do the identical in 2021. In line with Bloomberg information, SPAC listings closed roughly $26 billion of share gross sales in January, exceeding the earlier month-to-month file set in October 2020. There may be actually numerous enthusiasm surrounding the area, but in addition a good degree of skepticism. That’s one of many principal the reason why Golden Nugget On-line Gaming (NASDAQ:GNOG) inventory is down 16.4% within the final month.

A man looking at a computer with poker chips on the screen.

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GNOG is simply the second pure-play on-line gaming firm. It’s an enviable place. Land-based casinos are nonetheless hurting as a result of novel coronavirus pandemic. Though vaccines are rolling out, it’s going to take time for the trade to get again on its ft. iGaming and esports are enticing alternate options which are gaining steam.

The U.S. authorized sports activities betting market is predicted to supply $7 billion to $8 billion in annual income by 2025. In opposition to this backdrop, on-line betting platforms reached a file 20% of total playing income in 2020.

No surprises GNOG’s revenues elevated almost 63% year-over-year final 12 months. In line with preliminary estimates, working revenue climbed to between $23 million and $24 million within the 12 months, evaluating fairly favorably to the $17.6 million in 2019, a roughly 38% rise.

However with a lot going for the corporate, momentum has surprisingly been absent for GNOG inventory. 12 months up to now, shares are down 14%. Its extra well-known compatriot DraftKings (NASDAQ:DKNG) is up 24.1% throughout the identical interval. Despite the fact that DraftKings is a extra mature firm, contemplating its preeminent place within the trade. For all these causes and extra, GNOG inventory is a wonderful option to play the web betting market.

GNOG Inventory: A Cheaper DraftKings

Golden Nugget On-line Gaming is a reverse merger between on-line gaming and on line casino firm Golden Nugget and Lancadia Holdings II. The deal was estimated at a professional forma enterprise worth of round $745 million, or 6.1 instances the estimated 2021 income of $122 million. Regardless of the pre-merger hype, shares have dropped sharply from their 52-week excessive of $26 per share, they usually closed at solely $18 final Friday.

It’s an odd response to an organization that has finished a lot proper since going public. The corporate focuses on the New Jersey iGaming enterprise and likewise has market entry in Michigan, Pennsylvania. In line with the corporate’s personal estimates, its complete addressable market stands at $22 billion, out of which the purpose is to seize 10%. And it’s actually not bold. It’s already raking in almost 13% of the $800 million New Jersey iGaming market. Because it’s solely the second on-line betting pure play, 10% will not be a tall job by any stretch.

Regardless of all this, GNOG has a $1.15 billion market cap versus DraftKings, which is $22.77 billion.  There’s a sure degree of hypothesis constructed into the corporate’s shares however not on the degree of DKNG.

DraftKings goals for $1 billion in annual earnings earlier than curiosity, tax, depreciation, and amortization (EBITDA). Nonetheless, that determine hinges on the widespread legalization of on-line sports activities betting. As InvestorPlace‘s Matt McCall stated in his article on DKNG, “Not one of the 4 most populous states — California, Texas, Florida, and New York — have legalized on-line sports activities betting, which is the true moneymaker.”

Therefore, the markets are keen to reward DKNG inventory regardless of the apparent hurdles.

Get It Whereas It’s Sizzling

GNOG has finished every little thing proper since going public. Nonetheless, the dearth of constructive protection and momentum is shocking. In the meanwhile, just one analyst has initiated protection on the inventory. Benchmark analyst Mike Hickey charges GNOG inventory a “purchase,” with a $27 per share goal, implying a 47.4% upside to the present worth.

Its authentic 2021 income goal was $122 million. It already earns upwards of $100 million from the New Jersey market alone. Shifting ahead, Michigan and Pennsylvania will present high-growth areas that the corporate can exploit. The current license offers in Illinois and West Virginia solely add gas to the hearth. With the explosion in on-line betting revenues, its 2025 income goal of $635 million is fairly conservative and will probably be reached quickly relatively than later.

Chart shows the price performance of Golden Nugget Online Gaming (NASDAQ:GNOG) stock versus the other online betting stocks

The underside line is that on-line betting shares are on the transfer. Resulting from Covid-19, on-line sports activities betting is on a roll, translating to large positive factors for shares uncovered to this sector. No such luck on the subject of GNOG inventory, however that offers you a lovely entry level to purchase right into a high-growth trade.

On the date of publication, Faizan Farooque didn’t have (both immediately or not directly) any positions within the securities talked about on this article. 

Faizan Farooque is a contributing writer for InvestorPlace.com and quite a few different monetary websites. Faizan has a number of years of expertise analyzing the inventory market and was a former information journalist at S&P International Market Intelligence. His ardour is to assist the common investor make extra knowledgeable selections concerning their portfolio.

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