Sure, Landcadia Holdings II (NASDAQ:LCA) has all the name recognition of a fourth-place contestant in an elementary school talent show. Or go ahead: Mistake it for the long-lost sequel to some Orson Welles film that never got made in the first place. But like the high roller who checks into a casino under some boring alias, it’s about to become for investment purposes Golden Nugget Online Gaming. So in essence, LCA stock stands in for the special purpose acquisition company (SPAC) that’s going to fund the Golden Nugget’s web property in what’s called a reverse merger.
We could talk all day about whether reverse mergers equal backwards logic but regardless the universal question reads thus: Is this new company worth all the time, money and effort? Writing about LCA stock previously, I cheered this bad boy as a smart move by a gaming sector player hopping the train to soaring profits — and prospects — that no pandemic can kill. Or if you like: In cyberspace, no one can hear you sneeze. Contagiously. On the slot machine handle. Without a mask, because you still think the novel coronavirus is a Martian conspiracy.
As zero hour for the Landcadia-Golden Nugget merger draws nigh, I’m donning my best Vegas pinstripe suit, adorned with my official Rat Pack red hankie and smart fedora. Rest assured, I’m no fan of gambling with anyone’s investment money, yours or mine. I just want to look good as I take a good look at LCA stock.
LCA Stock An Odds-On Favorite
There are many, many nice things about Golden Nugget Online Gaming in theory. No impossible lines for the casino bathroom. No wannabe high rollers yelling so loud they shatter your wine glass. And for investors, no worries about whether this sector is going anywhere.
The name of the game here isn’t blackjack or roulette or craps. But it is one tourney everyone can win if the forecasts bear out. According to Statistica, “The global online gambling market is anticipated to be valued at more than $92.9 billion in 2023.” That would mark a 39.2% increase over 2020 projections. If you read anything about this field being too crowded, ask yourself if $92.9 billion is too slim a slice of pie to carve up.
Yes, LCA stock has stumbled badly over the last month: down 22% to $13 per share. Yet the stock is priced so low, minor fluctuations here and there are going to shake the percentages pretty badly. Or goodly. If the stock gained $3 per share, let’s say, you’d be looking at a 23% jump.
High Time to Buy Low
Not that this concerns me because we may well be in bargain basement territory. You’d have to go back to mid-August to see the price this low, and the SPAC has only been actively trading since late June. I’m not sure that the forces driving share prices down right now will be remembered in the slightest once the merger is complete and we’re a few years down the line.
Notice how I said “a few years down the line.” Because while the headlines will alternately gasp and drool as Golden Nugget Online Gaming gets on its publicly-traded feet, the online gaming juggernaut as a whole cannot be stopped. The stock will need time to for the sector’s ecosystem to absorb it. There, I believe the rising tide will float all boats (except of course for riverboat casinos).
I also stick by my assertion that Golden Nugget has what other online gaming outfits lack: big-time brand identity. We’re not just talking legalized gaming but legalized gaming history. Whether the new company will leverage that to the hilt remains to be seen but it’s a powerful plus. I mean, the brick-and-mortar Vegas icon appeared in Viva Las Vegas and Diamonds Are Forever. Elvis! James Bond! All Shook Up meets Shaken Not Stirred!
Time for a sequel? Who should star in it? How about the investor who hits the jackpot?
Golden Nugget a Golden Ticket
I find it deliciously ironic that the investor who wants to win in a gambling milieu need never roll the dice. What’s more, buying LCA stock would likely require patience that’s nothing like the adrenaline-fueled chaos of the blackjack pit. In fact, it could be downright dull as you wait for the potential to play out.
And while he’s not by baccarat buddy (yet), InvestorPlace Markets Analyst Luke Lango is even more pumped than I am. Just days ago, he wrote that Golden Nugget Online Gaming had 10X potential, calling it “the only reasonably valued, public pure-play on the iGaming boom.”
So there you have it: Luke and Lou agree. We’re not quite the Rat Pack. We’re not even the Brat Pack (though I could belong to the Fat Pack). But I don’t think either of us would tell you to wager on LCA stock. Because as far as I’m concerned — and as much is the case with any stock boasting this kind of promise — it’s not a wager at all.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.