Slowly but surely, politicians are starting to realize that there is a lot of money to be made by allowing its residents to gamble online. Adding gambling revenue to the books would help states get their budgets in line.
Nevada, Delaware, and New Jersey already have forms of legalized online gambling. Now Washington and Mississippi are considering legalizing aspects of online gambling.
Amaya Inc. (TSX:AYA) is a solid company that could benefit immensely from more states signing on to allow online gambling.
Acquisitions are working
On June 13, 2014, it was announced that Amaya had agreed to buy the parent company of online sites PokerStars and Full Tilt Poker for nearly $5 billion. Before these acquisitions, Amaya was predominantly a B2B gaming provider. Other casinos needed good games and Amaya was able to provide them.
By expanding into owning actual online brands, Amaya now had the potential to profit immensely off the rise in online gambling. Amaya could take its expertise building other types of casino games, put them onto the PokerStars and Full Tilt Poker platforms, and see what happens.
In a test conducted in Spain, 30% of people played the other games on the platforms. And what’s key is that there was no marketing done, so the users just found the features and played.
By owning these platforms, Amaya now gets to be the house rather than just a service provider. And as the saying goes, the house never loses.
The future for Amaya
As Amaya continues to develop its online casinos, it will be able to test which products do well and which ones don’t. Further, the company is likely to start making pushes into sports betting. There are soccer teams all around the world that have online betting houses sponsor their teams.
I believe 2015 will be spent with Amaya continuing to roll out its new products and expanding into sports betting. The United States is a lucrative opportunity, but Amaya will have to bide its time for more states to sign up for online gambling. But due to its smart acquisitions, Amaya is now the largest online poker company in the world. When it becomes legal in the U.S., the company will soar.
I am looking at a $45 per share price target by the end of the year, so today’s price might be a good point of entry. However, you may want to wait for the stock to dip down again, which is bound to happen at some point.
Amaya is a great tech stock that I think will make investors a lot of money. However, there is another tech stock that has been through the ringer and appears to have come out the other side ready to fight.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Jacob Donnelly has no position in any stocks mentioned.