WPT Stuck With Current Hand By James Altucher RealMoney.com Contributor 10/25/2004 1:00 PM EDT
WPT Enterprises (WPTE:Nasdaq)
BEARISH
Price: $8.28 | 52-Week Range: $6.32-$11
Televised poker has become hugely popular, but this company faces trouble ahead.
It has locked its primary property into a seven-year deal with the Travel Channel.
And it hasn't shown any strength in licensing fee generation to date.
Position: None
I love watching the World Poker Tour on TV, so what I'm about to write about the stock of WPT Enterprises (WPTE - commentary - Cramer's Take), the owner and operator of the World Poker Tour, pains me. This stock has largely been uplifted by the excitement surrounding the onslaught of televised poker. Having gone public in August at $8 per share, the stock closed Friday at $8.32.
With a market cap of $162 million, revenue of $9.62 million and net income of $600,000 over the trailing 12 months, it's hard to see how the current excitement for poker can justify the current price of the stock. But one might ask, with great ratings on its show on the Travel Channel, doesn't this bode well for the future?
Perhaps, but the company's revenue mix is problematic. Currently, 90% of the company's revenue comes from its television show, with the remainder coming from licensing deals. But the company's television show is locked into a long-term contract with the Travel Channel, ending in 2009, that gives the Travel Channel the rights to the show at a fixed rate that was determined prior to season one's success. Plus, the company has yet to recognize significant revenue from the licensing of the World Poker Tour name to other products.
Gambling on This Stock WPTE offers Internet-style hype, without the substance
As originally published, this story contained an error. Please see Corrections and Clarifications.
James Altucher is a managing partner at First Angel Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and the upcoming Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback and invites you to send it to james.altucher@thestreet.com.TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.
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