Why Did Bragg Gaming Stock Jump 18% on Thursday?

Bragg Gaming (TSX:BRAG) soared 18% after analysts weighed in on its recent securing of a casino deal, making it yet another gaming stock on the rise.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 21, 2022 11:30 am EST

Bragg Gaming Group (TSX: BRAG) saw shares climb as much as 18% on Thursday. This came after the company announced the securing of its casino deal, leading at least one analyst to raise guidance.

What happened?

As Ontario sports betting heats up, Bragg Gaming stock has been making some significant moves that have caught the attention of analysts. That recently included Cormark Securities analyst David Mcfadgen. Bragg Gaming secured an agreement on Jan. 18 to supply executive slots to Swiss operator Casino Interlaken.

This is the latest of several expansion projects for Bragg Gaming stock. It also recently acquired Spin Games from the Pennsylvania Gaming Control Board, which should be online this year.

While the news sent shares climbing, it was the analyst weigh-in that sent them soaring. Mcfadgen believes Bragg Gaming stock will become one of the major heavy hitters if and when single-day sports betting is approved in Ontario.

So what?

In an interview with BNN Bloomberg, Mcfadgen stated he believes Bragg Gaming stock will secure the area of online sports betting and casinos. It’s going to become very competitive with a very limited number of licences, he said, and Bragg, therefore, has an advantage.

The biggest difference here compared to its competitors, however, is that Bragg Gaming stock seems to be undervalued. While Mcfadgen decreased his price target for Bragg Gaming to $14 from $21 per share, that still a huge space between where it trades now at $6.85.

The difference for Bragg Gaming stock is that it’s a business-to-business gaming company. It powers online casino websites and provide games, taking a share of the revenue, Mcfadgen said. He expects them to have acquisitions coming in soon, targeted at the Canadian online casino market.

Now what?

There is a major shift coming. Right now, Canadians can only legally use the Ontario Lottery and Gaming website to take part in online betting. The single-day sports betting combined with new private entities will create opportunities galore for growth.

But Bragg Gaming stock seems to be the biggest winner. While others seem to already be fairly valued, Bragg still has a way to go. Now, of course, the target price did drop. But that’s likely due to the initial investments bringing down earnings combined with a volatile market. And it’s still a massive increase for the next year or so.

Mcfadgen believes Bragg Gaming stock will bring in revenue of $19.58 million for the next quarter, which would be a decrease from $20.97 million the year before. As of writing, the price target of $14 would represent a potential upside of 104%.