It’s not often that investors are presented with a chance to buy a company that is primed to experience explosive growth at a reasonable price. When that opportunity comes along, investors need to be prepared to pounce, taking advantage of mispriced assets.
In my opinion, Amaya Inc. (TSX:AYA)(NASDAQ:AYA) is one of those opportunities that investors should consider buying.
Amaya bought PokerStars and Full Tilt Poker for $4.9 billion. Its market share for online poker was 71% in 2015. And its poker games have had consistent quarterly active users. At the end of the first quarter in 2016 it had approximately 2.47 million active, unique subscribers playing games. For the past couple of years it has consistently been in the 2.2-2.5 million monthly users range.
Building on its success in poker, Amaya launched casino games, which actually have higher margins than poker games. At the end of the first quarter in 2015 it had 270,000 casino game players. Fast forward to the first quarter 2016 and it had 470,000 active players playing these games. Further, it launched its Sportsbook product last summer, and at the end of the most recent quarter it had 170,000 people betting on sports.
Its revenue and earnings show this tremendous growth. Its total revenue in Q1 was US$288.7 million, which is up 6% from US$272.3 million. While its poker revenue was down 11% to US$216.4 million, its casino and Sportsbook revenue was up by 267% to US$60.1 million. This is likely due to people moving from poker games to casino games as well as a drop in game play on Full Tilt. Its Q1 adjusted net earnings were US$85 million, up 26% from US$67.4 million year over year.
Going forward, the company has a series of planned initiatives to help the company generate further revenue. It recently launched in New Jersey, allowing it to capture 46% of the state’s market share. Since it is the single largest platform, I expect more people to migrate over to it because they are looking for liquidity. Further, the company plans on merging Full Tilt and PokerStars into one brand.
It expects to launch its poker and casino games in Portugal sometime in the second half of the year. And on its Sportsbook side, it is looking to launch in Italy and France, two countries with fierce soccer fans.
All in all, as people continue to move to the internet to do their gambling, I expect Amaya to be there, picking up market share. It’s not often that an opportunity presents itself for an investor to pick up shares in what could be a very fast-growing stock. Therefore, I suggest investors consider researching this company further and then start picking up shares.
