Amaya has 169 per cent upside, says Cantor Fitzgerald Canada

A better than expected quarter from Amaya (Amaya Stock Quote, Chart, News: TSX:AYA) has Cantor Fitzgerald Canada analyst Ralph Garcea betting the company’s success is a trend that will continue.

Yesterday, Amaya reported its Q1, 2016 results. The company earned (U.S.) $55.49-million from continuing operations on revenue of $288.7-million, a topline that was six per cent higher than the same period last year.

“Amaya remains focused,” said interim CEO Rafi Ashkenazi. “During the first quarter, we continued to execute on our growth plans despite unexpected challenges, including management changes and the ongoing strategic alternatives process. We attracted new customers to PokerStars, continued to introduce changes to improve the overall poker experience, expanded our on-line casino offering and continued to invest in our emerging on-line sportsbook.”

Garcea says Amaya’s first quarter bested his expectation on both the top and bottom line. He thinks the outperformance was no fluke.

“We believe the margin momentum from Q1/16 is sustainable into 2016 as FX headwinds taper off and sportsbook gains traction,” says the analyst. “PokerStars has ~102M registered users and ~71% market share. The user base should continue to grow leveraging the successful marketing program with Cristiano Ronaldo and Neymar Jr. – with 150M+ and 120M+ social media followers, respectively, and both having very remarkable seasons this year. In addition, the revamping of the poker VIP system to focus more on the engagement of recreational players is working – as net deposits have increased y/y and new players’ deposits are lasting longer. This in turn is fuelling the growing casino business, and should support the emerging sportsbook.

In a research update to clients today, Garcea maintained his “Buy” recommendation and one-year price target of (C)$45.00 (U.S)$34.00 on Amaya, implying a return of 169 per cent at the time of publication.

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