Golden Nugget Online Gaming is trying to find a base for support, despite the company providing an earnings report which indicates that expansion efforts have progressed well. This article provides three reasons why investors may be holding back on GNOG stock.
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This story originally appeared on MarketBeat
The online gaming sector has been one of the hottest sectors since the pandemic began. When players were banned from entering casinos, they turned their attention online. One of the companies that took advantage of this trend was Golden Nugget Online Games (NASDAQ: GNOG).
However, GNOG stock is down 35% in 2021 despite being a Results report that was impressive in almost every way. The company had sales of $ 26.7 million, an increase of 54% over the previous year.
The company's expansion efforts into other states is runs smoothly too. Golden Nugget now has potential market access in 12 states and plans to go live in seven of those states by the end of 2021.
And the company reported that $ 110 million public warrants were exercised. The meaning of this is that the outstanding warrants put pressure on the GNOG share and temporarily devalue it.
Why isn't Golden Nugget getting more lovers from investors? I can name three possible reasons.
SPAC fatigue is real
The first reason can be SPAC fatigue. Companies that go public through a special purpose vehicle (SPAC) are not new. In 2020, a record number of companies opted for it route and the trend will continue until 2021.
SPAC stocks tend to be more volatile as there are fewer review processes than a traditional IPO. One of the attractive features of a SPAC is its availability to retail investors. But that can be a double-edged sword. In many cases, there are reasons why institutional investors stay away from SPAC companies.
As with many SPAC stocks, GNOG's stocks rose significantly in late 2020. And as with many SPAC stocks, Golden Nugget's share price fell dramatically and did not rebound.
Just as the fear of missing out is a real emotion, there is also the fear of holding your pocket. however The company's earnings and forecasts show that GNOG deserves to be considered an online gambling game Camp for yourself.
Another reason the SPAC fatigue is that Tilman Fertitta, Chairman of Golden Nugget, is bringing his company with him. Feritta Entertainment, publicly via a SPAC, FAST Acquisition (NYSE: FST). As I wrote back in March, the $ 6.6 billion deal includes Fertitta's controlling stake in GNOG as one of its assets.
The company's debt
At the end of 2020, around the time the company went public, Golden Nugget had approximately $ 170 million in total assets and approximately $ 141 million in debt. The debt was around 82% of the balance sheet total.
The problem is that other companies in the industry, such as DraftKings (NASDAQ: DKNG) For one, you have a much better debt position with similar or better sales prospects.
Investors can look forward to seeing Golden Nugget making an operating profit. But the debt could serve as a headwind for GNOG stock.
The field is crowded
Similar to the electric vehicle industry, many companies compete for online gaming dollars. Golden Nugget isn't the largest of these companies. Hence, investors are likely to expect more from the company.
Is GNOG Stock a Buy?
In March I said I liked the $ 14 opportunity more than I did when the stock was trading around $ 27. GNOG stock has fallen more sharply since then, and I like it even more. however The technical outlook for the stock looks very messy. It is possible that GNOG will have to keep falling.
However, if the stock can provide a basis for support at its current price, it can be expected to perform well in the future. Right now I would put it on your watchlist and seek confirmation that it is time to buy it.
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