Golden Nugget Online Gaming Shines on Jefferies Buy Initiation

Golden Nugget Online Gaming is 'a compelling investment,' a Jefferies analyst says, initiating coverage of the stock at buy.
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Golden Nugget Online Gaming  (GNOG) - Get Report was glittering Tuesday after a Jefferies analyst initiated coverage of the online gambling and digital sports entertainment company with a buy rating and a $28 price target "based on demonstrated leadership-level assets and capabilities."

Shares of the Houston company at last check were 11% higher at $15.37.

"The magnitude and productivity prospects of the iGaming market have not been fully appreciated by [Wall] Street, ... and GNOG's positioning and product strength have been proven in New Jersey," analyst David Katz said in a research note. 

"GNOG and digital gaming – iGaming, specifically – require long-term vision in general."

The analyst said he viewed Golden Nugget "as a compelling investment as its 2020 performance in the nascent, competitive NJ market (revenue of $91.1 million and Ebitda of $28.9 million) provides a framework for the future."

Although the paradigm of gambling growth has evolved around online sports betting, Katz said he viewed the online casino market "as at least equal to that of sports betting at maturity."

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"The focus on iGaming as a priority is positioned for the next growth chapter of digital gaming," the analyst said. "We expect that as seasoned management continues to execute over time as it has in 2020, [Wall] Street's recognition of the merits of pure-play iGaming will become more evident."

Katz said Golden Nugget brings "leadership-level assets." 

He cited such factors as ownership of the Golden Nugget brand, access to 10 markets through five land-based casino assets and five partnerships/licenses, breadth of product with more than 870 titles, innovation, and demonstrated customer-relationship-management capabilities.

In February, the investor Tilman Fertitta, owner of the Houston Rockets basketball team, said he would take both the Golden Nugget Casino and the Landry's restaurant chain public in a $6.6 billion deal with a special-purpose-acquisition company.

Separately, Argus Research John Staszak on Tuesday upgraded Wynn Resorts  (WYNN) - Get Report  to buy from hold with a price target of $160, citing optimism about its properties in Las Vegas, Boston and Macau.

On Monday, Morgan Stanley Thomas Allen upgraded Caesars Entertainment  (CZR) - Get Report and MGM Resorts Entertainment International  (MGM) - Get Report to overweight from equal weight.

The analyst raised his price target on Caesars stock to $113 from $92, and increased his MGM forecast to $45 from $34.