1. Golden Nugget Online Gaming Inc
2. Golden Nugget Online Gaming Ipo
3. Golden Nugget Online Gaming Gnog
4. Golden Nugget Online Gaming Earnings
5. Golden Nugget Online Gaming Stock Forecast

Golden Nugget Online Gaming – or GNOG, for short – is a pure iGaming spin-off of that larger physical casino business. GNOG offers virtual poker, virtual black jack, virtual slots and much more. Golden Nugget Online Gaming could scale into a massive iGaming powerhouse, but a lucrative future is far from guaranteed. That brings us to the bear case. Putting it simply, shares at today’s. Keep in mind that Golden Nugget Online Gaming is not in any way related to Golden Nugget Casinos (based in Las Vegas and Laughlin). That company is privately held by Tilman Fertitta. Online Casino Play Now; Login to the 24k Club. Shut Up and Listen. Introducing the Golden Nugget Mobile App. View your mail offers instantly across all Golden Nugget Casinos. Check Comp Dollars, Tier Credits and Slot Point balances. Receive additional mobile-only bonus offers. Available for download in the Apple and Android stores. Golden Nugget Online Gaming – or GNOG, for short – is a pure iGaming spin-off of that larger physical casino business. GNOG offers virtual poker, virtual black jack, virtual slots and much.

© Source: rawf8/Shutterstock.com A man looking at a computer with poker chips on the screen.

Admittedly, Golden Nugget Online Gaming (NASDAQ:GNOG) is one of those companies that got away from me the moment my take was published. After I cautioned against a wager on GNOG stock, shares immediately went on a run toward $25. Then, following a mild correction, they charged above $26.

© Provided by InvestorPlace A man looking at a computer with poker chips on the screen.

Since then, however, GNOG stock has endured a sharp correction. At time of writing, shares are priced at $21. What does this imply moving forward?

Last month, I was worried about the economic risks sparked by the novel coronavirus pandemic. From historical data, gambling-related revenue weakened during the Great Recession. Obviously, the incentive to put your money at risk during a downturn isn’t quite as strong as during a bull market. However, I underestimated the power of the SPAC (special purpose acquisition company).

Still, the bullish argument for GNOG stock involves more than speculation. For instance, clinical research indicates that among gambling activities, lottery consumption may be recession-proof. “Because it is such an inexpensive product, it is probably not one of the first things that are cut from the regular monthly budget.”

As well, “Lotteries can provide some hope to improve the overall circumstances significantly, for a reasonably low cost.” Additional academic research confirms these points. Further, I believe that the availability and ease of access of lotteries makes them resilient to economic pressure.

Therefore, it’s reasonable that GNOG stock can benefit from such psychological tailwinds. Thanks to increasingly favorable legislation, Golden Nugget will be able to deliver the gaming experience to consumers conveniently and without person-to-person contact.

It’s done wonders for trading app Robinhood. But is this sustainable for 2021 and beyond?

The ‘Full Circle’ Argument for GNOG Stock

At the risk of getting it wrong again, I’m going to reiterate my cautious argument for GNOG stock. Mostly, I believe there’s an abundance of evidence that the economy is not recovering the way we need to inspire the kind of discretionary consumer sentiment that companies like Golden Nugget require. Thus, I still see “more incentive in waiting than taking a wild wager.”

Let’s start with the obvious: last month’s jobs report. Heading into the disclosure, economists anticipated that 50,000 jobs were added, which was already poor against the prior month’s comparison. In November, the labor market added 245,000 jobs. However, the actual result saw the economy shed 140,000 employment positions.

To be fair, evidence indicates that the drop was mostly due to the novel coronavirus, not any infrastructural reasons. As vaccines are distributed at scale, we should see the economy normalize, which would be excellent news for GNOG stock.

However, we don’t have a timeline for when the Covid-19 crisis will finally fade. Certainly, the U.S. has had a heck of a time trying to control the outbreak. But the critical factor here is what it may have done to the broader consumer psyche.

© Provided by InvestorPlace Personal saving rate vs. money velocity Source: Chart by Josh Enomoto

Golden Nugget Online Gaming Inc

As I noted earlier, research papers support the idea that certain gambling platforms (i.e., lotteries) were resilient during the Great Recession. Back throughout that downturn, the increase in the personal saving rate and the decrease in money velocity were relatively modest, all things considered. Yes, there were substantial percentage changes in the metrics, but the practical effect wasn’t paradigm-altering.

But that might not be the case with the present crisis. Today, the personal saving rate is at multi-year highs while money velocity is near all-time lows. Both metrics are deflationary, as it indicates that not enough money is circulating in the economy and whatever money is earned is largely saved.

Obviously, deflation is the enemy of any fiscal stimulus programs. And this severe magnitude of deflation is something we haven’t seen since the Great Depression.

Administrative Factors May Also Impact Golden Nugget

Interestingly, my InvestorPlace colleagues Sarah Smith and Larry Ramer note some activities that may affect GNOG stock. Apparently, Golden Nugget founder and owner Tilman Fertitta has been exploring an initial public offering for some of his holdings. Ramer writes:

As a result, investors may wonder whether Fertitta could look to sell some of his GNOG stock, causing the shares to tumble.

And as Smith noted, the billionaire has “borrowed hundreds of millions of dollars,” generally creating uncertainty for his empire, including Golden Nugget Online Gaming.

I believe these factors add to the main risks from the economy. Granted, if we recover from the coronavirus pandemic much sooner than anticipated, GNOG stock could rise. However, the smarter play suggests waiting on the sidelines for a better read.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

© Source: rawf8/Shutterstock.com A man looking at a computer with poker chips on the screen.

Golden Nugget Online Gaming (NASDAQ:GNOG) went public on Dec. 30, after merging with a SPAC (special purpose acquisition company) called Landcandia Holdings II. Based on my calculations, GNOG stock is worth considerably more, up to 65% more, based on a simple comparison with Draft Kings (NASDAQ:DKNG).

© Provided by InvestorPlace A man looking at a computer with poker chips on the screen.

Keep in mind that Golden Nugget Online Gaming is not in any way related to Golden Nugget Casinos (based in Las Vegas and Laughlin).

That company is privately held by Tilman Fertitta. However, Fertitta’s interests do own about 52% of GNOG stock, but we don’t yet know the exact amount of shares for two reasons.

Golden Nugget Online Gaming Merger

First, it appears that Golden Nugget Online Gaming does not even have its own investor relations website yet. Its NJ gaming site does not have any information on the company as a public entity. Second, the company has not filed with the SEC its final share count information, nor have Fertitta’s interests filed.

Moreover, this deal was a little different than most SPAC mergers. There was no PIPE deal (private investment in public equity) with institutional investors. That is a great thing for the public investors since they now own about 46% of the GNOG stock. This is based on nothing more than page 5 of the company’s investor presentation from July.

It is also the reason why it took two shareholder meetings in December for the deal to close. Moreover, this is making the stock a bit more volatile than most other SPAC mergers. For example, it appears a lot of investors have been selling their shares in GNOG since the merger closed on Dec. 30.

Nevertheless, after carefully studying the company’s presentation and its Q3 earnings report, GNOG stock is worth considerably more than its present price. Here is why.

Golden Nugget Online Gaming Ipo

What Golden Nugget Online Gaming Is Worth

GNOG stock is trading for about 12 times its revenue on an enterprise value basis. But DKNG stock trades at about 19.5 times EV-to-sales.

Gallery: 7 Stocks Warren Buffett Should Consider (InvestorPlace)

Therefore, assuming both companies should have a similar or fairly similar valuation as the only two online gaming stocks, GNOG should move up in value. This implies that GNOG stock should trade about $33.92 per share or 65% above its price on Jan. 5 ($20.59).

Here is how I came up with this valuation calculation. First, the slide presentation from the original June 29 announcement indicates on page 5 that about 68.3 million shares will be outstanding. Therefore at today’s price, the market capitalization for GNOG stock is $1.406 billion.

Next, to derive the pro forma enterprise value, we need to add in the net debt after the merger closed. We won’t know the final numbers until its Q4 earnings release later this month. But the presentation indicates there will be $150 million in debt and $88 million in cash. That works to net debt of $62 million. Therefore, the enterprise value (EV) is $1.468 billion.

Now we can estimate the company’s pro forma 2021 enterprise value-to-sales ratio. Based on its presentation, again on page 5, Golden Nugget Online Gaming will make $122 million in sales during 2021. This also corresponds with its Q3 numbers where it made $25.9 million in net revenue. On a run-rate basis, that works out to $103.6 million. the 2021 estimate of $122 million in gaming sales assumes 17.7% growth during 2021.

As a result, we can derive the EV-to-sales ratio by dividing $1.468 billion (EV) by $122 million (2021 sales estimate). That works out to 12 times.

This is significantly below DraftKings’ EV-to-sale ratio. Based on my estimates their valuation is 19.5 EV-to-sales.

What to Do With GNOG Stock

Based on this information we can multiply 19.5 times the $122 million in 2021 sales. That gives GNOG stock a $2.379 billion EV. After subtracting the $62 million in net debt, the target market cap should be $2.317 billion. Now, since we know there are 68.3 million shares (see above), the price should be $33.92. This price is 65% above its $20.59 price on Jan. 5.

Online sports betting is slowly gaining acceptance on a state-by-state basis. Recently Golden Nugget Online signed up sports betting hotel deals in both West Virginia and Michigan.

Golden Nugget Online Gaming Gnog

Moreover, GNOG is gaining a reputation as having some of the best “matching” deposit rates. Apparently, if you deposit $1,000, GNOG will match those amounts in matched play up to $20,000. This is going to make online gaming extremely popular in the states where it is approved.

Once the company announces its Q4 earnings, we will have more detailed financial information to value the stock. At that point, I believe it will become apparent how cheap GNOG stock is compared to DKNG stock. The arbitrage between the two stocks’ valuation will likely quickly close.

Moreover, Golden Nugget Online Gaming made it clear it wants to have access to capital by being public. Here is what that means on a practical basis. They are going to push up the stock before selling equity.

Golden Nugget Online Gaming Earnings

In effect, this was a very smart move by Fertitta. He did not follow the typical route of giving PIPE hedge funds a discount at $10 per share like most SPACs. By selling shares at a much higher price, there will be less dilution and a higher upside for GNOG shareholders.

So, if you believe my calculations, you now have an early insight into what will likely happen. The bottom line is GNOG stock is worth at least 65% more or $33.92 per share.

On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Golden Nugget Online Gaming Stock Forecast

Mark Hake runs the Total Yield Value Guidewhich you can review here.