Golden Nugget Online Glitters as Analyst Says ‘Buy’

Posted on: January 13, 2021, 09:52h. 

Last updated on: January 13, 2021, 12:53h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Golden Nugget Online Gaming (NASDAQ:GNOG) is standing out as one of Wednesday’s best-performing gaming equities. That’s after a Wall Street analyst touted the company’s enviable positioning in the internet casinos and online sports betting markets.

Golden Nugget Online
Tilman Fertitta at a Houston Rockets game. His Golden Nugget Online Gaming soared on new analyst coverage today. (Image: AP)

In a note to clients today, Benchmark’s Mike Hickey rates GNOG stock a “buy,” with a $27 price target. That forecast implies upside of 31.5 percent from the Jan. 12 closing price. Hickey’s call is enough to have the iGaming name higher by almost 12 percent in late morning trading. If those gains hold or are added to, today would be GNOG’s best intraday performance since its Dec. 30 debut as a public company.

Landcadia is a special purpose acquisition company (SPAC) controlled by Tilman Fertitta and investment bank Jefferies. It merged with Golden Nugget Online to bring the latter public. That transaction was completed on Dec. 29. Fertitta is GNOG’s largest shareholder.

Benchmark’s Hickey says his bullishness on the name is in part attributable to superior brand recognition and strong online casinos market share, coupled with the company’s early entry into mobile/online sports wagering.

GNOG is one of the dominant iGaming operators in New Jersey, and also has market access in Michigan, Pennsylvania, and West Virginia.

Quick Coverage

Today marks just the tenth day that GNOG is trading as a freestanding entity,n and Hickey is the first analyst to initiate coverage of the stock.

The company sports a market capitalization of $1.38 billion, putting it firmly in the small-cap territory. Broadly speaking, analysts don’t cover smaller companies with the same intensity as large- and mega-cap firms. However, online casinos and sports betting are scintillating in the investment community, and there are examples of analysts rushing to cover newly public names in these industries.

It’s also possible that now Hickey is tracking GNOG, others will join the party over the near-term. That scenario frequently plays out with newly public companies, regardless of industry.

GNOG Perks

Prior to its merger with Landcadia, GNOG was profitable — a rarity among young, emerging online gaming companies. Additionally, the SPAC transaction provided the target with $80 million in cash for its balance sheet, which Hickey highlights as a benefit for the company and investors.

The analyst says the strong balance sheet is “supportive” of planned investments and efforts to enter new markets. He views the iGaming and sports wagering industries as “potentially massive and accelerating.”

In the third quarter, GNOG’s gross gaming revenue (GGR) jumped 93 percent, while net revenue and operating income both increased 92 percent.

As the company delivers quarterly reports this year, analysts and investors are likely to key in Michigan and Pennsylvania data, as well as updates on efforts to procure online casino and/or sports betting licenses in new states.