Cantor cuts target on Amaya Gaming, maintains “Buy” rating

Amaya Gaming CEO David Baazov. Cantor Fitzgerald Canada analyst Justin Kew says a soft Q4 and a lack of guidance will bring short term uncertainty to the company’s stock, but long term catalysts remain.
A softer than expected fourth quarter and a lack of guidance will bring an air of uncertainty to Amaya Gaming’s (TSX:AYA) stock, says Cantor Fitzgerald Canada analyst Justin Kew.

Yesterday, after market, Amaya released its Q4 and fiscal 2013 results. In the fourth quarter, the company posted adjusted EBITDA of $15.4 million on revenue of $39-million, falling below Kew’s expectation that the company would earn $17.9-million from a topline of $47.8-million and the street consensus of $19.5-million on $46.2-million in revenue.

In a research update to clients this morning, Kew lowered his earnings and revenue expectations for Amaya Gaming fiscal 2014 and 2015. He now believes the company will post EBITDA of 76.1-million on revenue of $189.7-million in fiscal 2014, down from $80.2-million and $198.5-million. In fiscal 2015, he now believes the company will post EBITDA of $93.1-million on revenue of $225.6-million, down from $100.9-million and $248.1-million.

The revised revenue and earnings numbers this morning led Kew to drop his one-year price target on Amaya Gaming from his previous $10.00 to a new target of $8.00. He maintained his “Buy” rating on the stock.

Despite the underwhelming quarter, Kew says there remain a number of upside catalysts in Amaya’s story. First, he notes that management plans to sell intellectual property that is currently valued on its balance sheet at $30-million, there is the potential for additional wins from both Cadillac Jack and Diamond Gaming, and there is additional upside that would come from more states legalizing online gaming.

Shares of Amaya Gaming closed today down 15.4% to $6.30.

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