People spend more time on their phones and computers than ever before, so it only makes sense that they would want to do their gambling online as well. However, governments have made it very difficult for these people to actually do online gambling. Fortunately, it’s only a matter of time before governments around the world realize that there is a lot of potential revenue in online gambling.
We’re already seeing this in New Jersey. The state decided to give Amaya Inc. (TSX:AYA)(NASDAQ:AYA) regulatory approval to operate its Pokerstars and Full Tilt Poker brands within its jurisdiction. This is a big barrier of entry for Amaya, and now that New Jersey has signed up for it, the floodgates are primed to open.
Delaware and Nevada both have legalized online gambling. Now Amaya just needs to convince the regulators in those states that it should be allowed to operate there. With New Jersey having given approval, it’s only a matter of time before it expands into Delaware and Nevada. And other states, hungry for more revenue in state coffers, will follow.
Restoration of America’s Wire Act
There is one bill that is getting in the way, as is typical in politics. Because casino owners are worried about losing all their business to online gambling, they’re pushing hard to convince politicians to push the Restoration of America’s Wire Act (RAWA) through Congress.
The goal of this bill is to effectively make online gambling illegal save for online lotteries. In essence, wagers and bets would fall under this law, making any site that allows gambling illegal. What makes the bill particularly scary is that it would override any state law. The fact that New Jersey allows online gambling won’t matter if RAWA passes.
Fortunately, there is a large coalition of politicians on both sides of the aisle that are against the bill because it inhibits a state’s rights. Whether or not the bill actually becomes law has yet to be determined, but I believe we’re only a few years away from governments being completely in support of online gambling.
Should you buy?
The business prints money. In the 10 months since it acquired Pokerstars and Full Tilt Poker, the company generated $511 million EBITDA. As more states get on board with the revenue potential of online gambling, I expect these numbers to increase significantly.
My belief is that this is a high-quality tech stock that is tremendously overvalued from a traditional stock analysis perspective. That being said, if the United States market opens up, I believe that the current value of the stock is very much a discount on the true value of this company. If you buy shares of this stock, you’re buying it based on its future potential rather than its present day value.
In my eyes, if you don’t buy this stock, you will regret it later. How many times have you said, “If only I had done that?” Amaya may be an example of that.