Canadian-listed NeuLion (NeuLion Stock Quote, Chart, News: TSX:NLN) is currently benefiting from one of America’s largest and most frenzied sporting events, notes Cantor Fitzgerald Canada analyst Ralph Garcea.
The 2016 NCAA men’s basketball tournament (March Madness) is down to its “Final Four” teams. On Saturday, the Villanova Wildcats will play the Oklahoma Sooners and the North Carolina Tar Heels will play the Syracuse Orangemen for a right to play in Monday’s final.
NeuLion partners with several NCAA schools to provide live and on-demand content to multiple devices and a variety of other services, such as e-ticketing and donor management. Two of the companies clients are part of the final four; a Monday battle between North Carolina and Oklahoma would represent an “all-NeuLion” final.
Garcea, who says he expects NeuLion’s long term organic revenue growth to settle at between 5 per cent and 10 per cent and its EBITDA margins to trend towards the 30 per cent level, thinks this year’s Final Four result can only help the fledgling company.
“In addition to the cultural phenomenon of the tournament, the social aspect is also prevalent,” he says. “The American Gaming Association (“AGA”) predicts that $9.2B will be wagered on this year’s March Madness tournament, up y/y. Geoff Freeman, AGA president and CEO, claimed sports betting to be “the new national pastime.” As with other types of gambling, while a minority of the wagers will be placed legally, the majority is passed through illegal routes. The AGA estimates that of the $9.2B wagered on this year’s March Madness tournament, only roughly $262M will be bet legally at Nevada sportsbooks. The AGA estimates that the aggregate illegal sports betting market in America grew to $148.8B in 2015. All of these trends undoubtedly enhance the need to be ‘connected’ to the game at all costs. NLN is well positioned to benefit from these trends as sports fans go online to view live streaming of events or ondemand content such as interviews, highlights, etc.”
In a research update to clients today, Garcea maintained his “Buy” rating and one-year price target of $2.00 on NeuLion, implying a return of 75 per cent at the time of publication.