There is momentum in gaming stocks like Wynn Resorts (NASDAQ:WYNN) and MGM Resorts (NYSE:MGM). However, a lot of investors seem to be overlooking Golden Nugget Online Gaming (NASDAQ:GNOG). GNOG stock hasn’t been around long, but it should be on your radar.
The gaming industry has growing pent-up demand, as consumers are looking for a return to normalcy. It can be seen in booking patterns, management commentary from hotel operators and flight traffic. I don’t know how long it will take to vaccinate enough of the population to see a return to normal. Many economists and the Federal Reserve understand that 2021 won’t see an immediate turnaround.
However, most are optimistic that by mid-year, we will be seeing a large increase in economic activity. By the second half, the hope is that we are booming, economically speaking.
The new White House Administration hopes to administer 100 million doses of the coronavirus vaccine in the next 100 days. Obviously that won’t cover America’s total population of roughly 330 million people, but it’s a start. It’s ambitious, but if achieved we will have a solid percentage of the country vaccinated by early Q2. At least enough to start traveling, gambling, vacationing and going back out to eat.
But what about until then?
A Few Golden Nuggets
Those who have been to Las Vegas or Atlantic City are likely familiar with Golden Nugget. Familiar with these properties as they may be, that’s not exactly what this stock is.
There’s a lot of hope and optimism floating around for casino names like MGM and Wynn, as well as online sports betting platforms like DraftKings (NASDAQ:DKNG). Golden Nugget Online Gaming is somewhere in the middle.
The company is wholly owned by Tilman Fertitta. He owns the Golden Nugget Hotel and Casinos, a large portfolio of restaurants and the NBA’s Houston Rockets. His Golden Nugget Online Gaming entity recently came public via a SPAC offering.
Currently operating in New Jersey, the company’s “pandemic-proof business model keeps showing its resilience.” Those were the company’s words after reporting record third-quarter results. Revenue and operating income jumped more than 90% year over year, as the company logged another profitable quarter.
That’s pretty promising in the current environment we’re in. I just talked extensively about the reopening of the economy. Is that good for GNOG stock?
Some may say no, because once brick-and-mortar locations are back up and running, who will want to gamble online? Admittedly, it’s part of the risk. However, I think a rebound in economic activity will be more important to the company’s story. Also from the company:
Golden Nugget is a household name throughout the United States and its iGaming business is a well-established leader in New Jersey, the largest online gaming market in North America. GNOG has obtained market access, subject to regulatory approval, to Pennsylvania and Michigan and anticipates launching its online casino brand in each of those new markets in early 2021.
Additionally, the company has generated solid growth over the past few years, before the word “pandemic” was in everyone’s vocabulary.
Bottom Line on GNOG Stock
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The pandemic’s economic hit has left states scrambling for additional tax revenue. That and a recent Supreme Court ruling has opened the door to online gaming, allowing companies like Golden Nugget to make an entrance.
There is just one analyst on record as of now, but they expect $100 million in sales in 2021 and $140 million in 2022. If more states join the legalization trend — and they are — and if Golden Nugget Online Gaming can gain entry to these states, perhaps these estimates will prove conservative.
How has it reflected in GNOG stock price? About as you would expect at this point. The company is an under-followed online gaming SPAC, a space that’s had plenty of volatility lately.
After breaking out over $18, GNOG stock quickly sped up to $25 before temporarily clearing this level and topping out at $27.18.
Since then, it has endured a sharp pullback, where the 50-day moving average continues to act as support. The stock is now putting in a series of higher lows and lower highs — tightening into a wedge pattern.
Eventually this wedge will resolve to the upside or the downside. A close below the 50-day moving average would be a bad sign for GNOG stock, potentially putting $18 back in play. That’s followed by the 100-day moving average.
On the upside, look for shares to clear this week’s high at $21.46, then the 21-day moving average. Above last week’s high at $23.41 and the $25-plus area is in play.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
