Amaya gets price target cut at Cantor Fitzgerald

Anticipation of a weaker than expected third quarter has Cantor Fitzgerald Canada analyst Ralph Garcea feeling a little less bullish about Amaya (Amaya Stock Quote, Chart, News: TSX:AYA).

On Friday, Amaya reported its Q2, 2016 results. The company earned (U.S.) $22.49-million on revenue of $285.93-million, a topline that was up 10.2 per cent over the same period last year.

“We continue to execute on our 2016 strategy,” said Rafi Ashkenazi, whom Amaya also announced has become its permanent CEO. “Through focused expense management and product improvements and diversification, we delivered second quarter results that overcame seasonal headwinds and continued currency challenges, evidencing the strength of our combined core business. In addition, the special committee continues to focus on the strategic alternatives process with a committed view towards maximizing shareholder value.”

Garcea says Amaya’s second quarter was essentially in-line with his and the street’s expectations, but notes that headwinds are forming for the company’s next quarter.

“The company provided a July business update, that points to a weaker than expected Q3/16, explains the analyst. “Seasonally, Q3 is the weakest qtr as last year we saw Q3/Q2 down 3.7%; with Q4/Q3 up 17.6%.”

In a research update to clients today, Garcea maintained his “Buy” rating on Amaya but lowered his one-year target price on the stock from (C) $45.00 to (C) $40.00 (U.S target pice lowered from $34.00 to $30.80), implying a return of 89 per cent at the time of publication.

Garcea thinks Amaya will post Adjusted EBITDA of $496.3-million on revenue of $1.156-billion in fiscal 2016, numbers he expects wil climb to Adjusted EBITDA of $575.7-million on revenue of $1.338-billion the following year.