Posted on: June 9, 2021, 12:13h.
Last updated on: June 9, 2021, 12:26h.
Higher by a jaw-dropping 47.26% over the past month, NeoGames (NASDAQ:NGMS) stock is quietly one of the best-performing gaming equities this year. One analyst believes the internet lottery provider will continue its bullish ways.
In a note to clients today, Stifel analyst Steven Wieczynski reiterates a “buy” rating on NeoGames, while lifting his price target to $80 from $54. That implies upside of 11.1 percent from the June 8 close. While shares of the Israeli gaming company are higher by 89.47 percent year-to-date, the analyst sees room for more upside, as investors reassess views on internet casino and sports betting equities.
Discernible catalysts for NGMS’s recent outperformance are limited, though we continue to see structural tailwinds as investors potentially rotate out of OSB/iGaming names (which have come under pressure in recent months) and into other digitally-led disruptors in the consumer space,” said Wieczynski. “We expect these trends to continue as we approach a likely highly competitive 2021/22 NFL season for OSB operators.”
This is the second time in less than a month that the Stifel analyst boosted his price forecast on NeoGames stock.
NeoGames Stock Has Makings of Internet Winner
As Wieczynski notes, the post-initial public offering (IPO) of NeoGames is nothing short of impressive. Since going public last November, the stock has more than quadrupled. That puts it in elite company among the iGaming and sports betting operators that came to market over the past couple of years. Only DraftKings (NASDAQ:DKNG) competes with NeoGames in total return terms among newly public online gaming operators.
However, there’s a marquee difference between NeoGames and internet casino and sportsbook companies. The iLottery company contends with far fewer rivals, while the iGaming and online sports wagering spaces are hyper-competitive.
The Stifel analyst points out that some of the recent weakness in DraftKings is attributable to mounting competition in the online sportsbook space and the impact that will have on operators’ growth.
“Many of these pressures do not apply to iLottery, which we believe supports a premium multiple vs. iGaming/online sports betting peers,” said Wieczynski.
One Important Commonality
Beyond being an online business, NeoGames shares something else in common with its internet casino and sportsbook counterparts: Its business outlook and stock price are tethered to state-level legalization. Currently, the company’s biggest US market is Michigan, and it’s ramping up operations in New Hampshire and Virginia.
The trajectory bodes “well for NGMS’s Alberta, Canada contract, where the company recently introduced draw games to the platform, as well as for North Carolina, which currently only offers draw games, but we believe could pursue a broader offering set down the road (which would likely be a positive catalyst for the shares),” said Wieczynski.
NeoGames management says the company is pursuing iLottery contracts in the following states, in alphabetical order: Alaska, Connecticut, Maryland, Massachusetts, Missouri, Ohio, and Oregon.
“While NGMS’s ability to maintain leading market share remains a prove-me story for many investors, given NGMS’s relative scale, we see NGMS as well-positioned here as a pure-play online disruptor benefiting from first-mover advantage,” adds the Stifel analyst.