Amaya Inc. Is Firing on All Cylinders: Time to Buy

Despite news of the CEO leaving, Amaya Inc. (TSX:AYA)(NASDAQ:AYA) had a great quarter, so I recommend buying this stock.

Amaya Inc. (TSX:AYA)(NASDAQ:AYA) is really hot, firing on all cylinders, and continuing to innovate in the online gambling world. And even though this company is dealing with drama, if you look beyond that and analyze the numbers, this is a stock that is primed and ready to shine.

It released a strong earnings report on Friday. Total revenue was up to US$285.9 million, a 10% increase year over year. While its poker revenue was relatively flat at US$215.6 million compared to US$216.1 million the year before, its casino and sportsbook revenue was up 89% from $31.5 million to $59.6 million. With such strong revenue, it was able to show US$89.7 million in adjusted net earnings, up 25% from the same period a year prior.

It continues to see an increase in customer registrations, which were up from 95.3 million ending June 30, 2015, to 103.5 million ending June 30, 2016. Its quarterly active unique users were at 2.35 million, up from 2.28 million in the same period last year. While poker continues to be the dominant force with 2.26 million unique players, its casino business saw 440,000 unique actives, and its sportsbooks are up from 170,000 to 230,000 quarter over quarter.

People like the games and continue to play them.

Here’s what makes me excited about the above numbers: while Amaya has 71% of the poker market share, this is low-margin business, unfortunately. But casino and sportsbooks are high margin because it’s player versus Amaya, whereas poker is player versus player.

And the company isn’t slowing down.

Since launching in New Jersey almost a year ago, it has expanded its poker market share to 44%. To help increase this market share, Amaya rolled its two main poker brands, Full Tilt Poker and PokerStars, into one brand because of liquidity. The more liquidity on a poker site, the more people who will play there because it gives them the chance to gamble more. Combining the two large brands should help Amaya absorb more of New Jersey’s online market.

The company has a few initiatives planned for the second half of 2016. The first is to re-launch in Portugal should it receive its licensing approval, which it has no doubt about. It also will be launching a mobile app for its casino games, so users can play on the go.

It wasn’t all positive news on Friday. David Baazov, co-founder and CEO of Amaya, will be resigning. The markets are taking this rather negatively, but I think that’s a poor way of looking at it. Baazov is under investigation for insider trading regarding the big acquisition that brought Full Tilt Poker and PokerStars into Amaya. Therefore, his leaving clears the company of any negativity.

Fortunately, the markets reacted and send share prices down a few percentage points. If you ask me, that just makes it an even better buy. The reality is simple: people like their phones and gambling online. Amaya is expanding into high-margin casino games and continues to dominate in poker. If other states and countries see how successful Amaya is, growth could just be getting started. I am a firm believer in this company and encourage investors to buy shares.

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.

More on Investing

ETF stands for Exchange Traded Fund
Investing

2 High-Yield Dividend ETFs to Buy to Generate Passive Income

Both of these Hamilton ETFs sport double-digit yields with monthly payouts.

Read more »

engineer at wind farm
Energy Stocks

1 Canadian Utility Stock to Buy for Big Total Returns

Let's dive into why Fortis (TSX:FTS) remains a top utility stock long-term investors may want to consider right now.

Read more »

man in suit looks at a computer with an anxious expression
Tech Stocks

Short-Selling on the TSX: The Stocks Investors Are Betting Against

High-risk investors engage in short-selling, betting against some TSX stocks for bigger profits.

Read more »

woman retiree on computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

This TSX stock has given investors a dividend increase every year for decades.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Stocks for Beginners

How to Grow Your TFSA Well Past the Average

Need to catch up quick with your TFSA? Consider some regular contributions to this top bank stock, as well as…

Read more »

dividend growth for passive income
Investing

Key Canadian Stocks for a Wealth-Building 2025

These three Canadian stocks could outperform next year, given their solid underlying businesses and healthy growth prospects.

Read more »

Tractor spraying a field of wheat
Metals and Mining Stocks

Where Will Nutrien Stock Be in 1 Year?

Nutrien stock has had a rough few years, and this next year may not be easy. But long-term investors may…

Read more »

Canadian dollars in a magnifying glass
Energy Stocks

The Smartest Energy Stocks to Buy With $200 Right Now

The market is full of great growth and income stocks. Here's a look at two of the smartest energy stocks…

Read more »