I have been an avid follower for the better part of a decade. Now, I’ve never invested in a gaming stock, however, Amaya has made some material acquisitions and seems to be a significant market player. With a 4 billion market cap- wow- this is a huge going concern on the scale of a Veresen or similar sized firm.
Thanks so much for your long term support and this assignment. Amaya Inc. (AYA TSX) made a big splash with their $4.9 billion takeover of Oldford Group in June of 2014. Oldford controlled the PokerStars and Full Tilt Poker brands which boast 85 million registered players. The online gaming industry is expected to see revenues grow to $42 billion by 2018 from $29 billion in 2014. The company has also been selling and spinning off assets as they streamline operations to sharpen their online focus.
You mentioned the company’s market capitalization of $4.24 billion and suggested that the scale made it comparable to Veresen Inc. (VSN TSX). Given that they operate in different sectors with varying capital requirements and demand drivers it might not be a valid comparison. What you also have to keep in mind is that over time you can expect more competition in the online gambling sector as more jurisdictions legalize the practice.
An audit of the charts will help identify the patterns that demand your attention when analyzing AYA.
The three-year chart outlines the explosive move higher that followed the announcement of the deal to buy Oldford Group and the subsequent topping out in late November of 2014 as the shares hit a 52-week high of $39.25. The MACD and the RSI both generated sell signals at the high point informing knowledgable investors to consider capturing some of the available profits.
The shares are currently in a gentle downtrend. They have breached support along the 50-day moving average, and are now meeting resistance along it. What is also observable is the support that the stock has tested at $28.00.
The six-month chart offers a close up of the buy and sell signals generated by the MACD and the RSI and the support along $28.00. The appearance of the beginnings of a descending triangle with a base at $28.00 could prove problematic. A descending triangle is a bearish indicator that needs to be monitored. Until the downtrend is resolved I would approach AYA with caution.
Next time a review of DragonWave Inc. (DWI TSX) will be presented on a request from Amit.
Make it a profitable day and happy capitalism!