Golden Nugget Online Gaming (NASDAQ:GNOG) stock isn’t getting the adulation it deserves, and the name could potentially deliver massive returns — perhaps doubling or tripling, as market participants recognize growth offered by online casinos.
Those are the sentiments of Jefferies analyst David Katz, who’s recently been bullish on the online gaming name. He reiterates a “buy” rating on Golden Nugget Online with a $28 price target — well above the $15 area at which the shares reside today.
We believe the Street’s shifting focus to the merits of iGaming from online sports betting is underappreciated, and as proliferation evolves, GNOG’s positioning should be better reflected in the shares,” Katz said in a note to clients.
The analyst waxed bullish on Tilman Fertitta’s internet casino operator last week, but his latest take indicates a move to $28 by GNOG is more of a base case. In an extremely bullish scenario, Katz believes the stock can surge to $45, or triple its current price. The consensus price projection among Wall Street analysts is $24.
GNOG Stock Requires Long-Term View
Equities typically don’t double in rapid fashion, and the road to a triple is even longer. Plus, GNOG has to shake out of a slump before it can earnestly flirt with the lofty price estimates set forth by Katz.
The company went public last December following a merger with a special purpose acquisition company (SPAC) co-owned by Fertitta and Jefferies. Year-to-date, the shares are off 23.25 percent, and that’s with the benefit of a 9.64 percent rally over the past week.
Part of that sluggishness could be attributable to investors prioritizing names with heavier online sports betting exposure over online casinos. However, the latter offers its own favorable growth trajectory. Goldman Sachs recently said it believes internet gaming will be a $14 billion industry in 2033, up from $1.5 billion today.
Specific to GNOG, the company is already profitable, holds dominant market share in New Jersey, and recently forecast 2020 gross gaming revenue (GGR) growth of approximately 67 percent.
Katz, the Jefferies analyst, says New Jersey highlights the efficacy of the iGaming investment thesis — one that offers better margins and higher player lifetime value relative to sports wagering, leading to superior returns on invested capital for operators.
Nascent Signs of Momentum for GNOG
Broadly speaking, Jefferies is positive on the online gaming universe, including casinos and sports wagering. The research firm’s recently updated digital gaming brand matrix indicates there was incremental improvement in March compared to February, and that long-term momentum remains “robust.”
Relevant to GNOG stock, the bank believes revenue will trend higher in meaningful fashion.
“While the company is prioritizing iGaming over sports betting roll out, we’ve seen increased robust momentum in March, favoring our assumptions of top-line acceleration,” said Jefferies.
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