That’s one of the central themes of Macquarie Research’s coverage initiation for Amaya, titled “Amaya: Sitting at the big boy table.”
Macquarie (correctly) notes that Amaya is one of the “few B2C platforms that have both content scale and liquidity,” well positioning it to succeed in iGaming verticals that hinge on liquidity, like poker, and those that drive traffic through content diversification, such as casino.
Yes, at present the only vertical in which Amaya has a stranglehold is online poker, of which it’s two brands – PokerStars and Full Tilt – account for 66% of regulated market share.
That may be in process of changing, as the company has begun rapidly expanding into new territories:
As per Macquarie, should Amaya capture 3-5% market share of casino and sportsbook, it will nearly double revenue and grow EBITDA close to a $1 billion by 2018.
Yet, Amaya may be poised for even more substantial growth, as its exceedingly large database grants it a distinct competitive edge.
Macquarie alludes to several of the advantages afforded by Amaya’s sheer size in its report:
As to the final point: At present, approximately 50% of PokerStars players utilize other platforms to participate in casino/sportsbook, per data provided by Amaya.
Amaya’s entry into these spheres will undoubtedly shrink those numbers, perhaps dramatically.
Macquarie’s theory that Amaya should be compared to user driven Internet companies is an interesting one, and given Amaya’s comparable size to Instagram, Zynga and Netflix, one that is certainly not without merit.
Yet, Amaya’s ability to distinguish itself more as what Macquarie refers to as a “global leveragable platform” may hinge on a few yet-to-be-answered questions:
In either case, Macquarie notes that Amaya’s valuation compared to B2C Internet companies is inexpensive and if the company traded at industry averages “of 6x P/S or 24x EV/EBITDA” then the stock could trade “30 – 100% higher.”
Whereas Macquarie sees Amaya’s online poker revenues growing by 5% over the next three years, Eilers Research, in its “Initiating coverage on Amaya, Inc.“ only has revenue increasing by 1-2% in 2015-16 before dipping slightly in 2017.
Reaching further, Eilers places total Amaya revenue for 2016 at $1.721 billion (CAD) verses $1.791 billion for Macquarie.
Eilers suggests that its conservative estimates are a reflection of a shrinking online poker market, Amaya’s uncertain future in so-called “grey markets” and possible brand dilution as a result of introducing new iGaming verticals.
On the other hand, Macquarie’s sees online poker market growing at a clip of approximately 10% per year, primarily driven by mobile and increased regulation in the US. Its outlook regarding casino/sportsbook is also weighted toward optimism.
Regarding Amaya’s online poker growth prospects, I tend to side with Eilers, as there is little indication that the online poker industry is in the midst of a turnaround.
That said, there is still little reason to believe that PokerStars/Full Tilt won’t carve out a significant presence in the casino/sportsbook arenas, which may prove more lucrative than doubling the size of their poker arm over the next five years.
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