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In the recovery following the onset of the novel coronavirus, interest in the online gambling market has been skyrocketing. Not everyone will recognize special purpose acquisition company Landcadia Holdings (NASDAQ:LCA) or LCA stock. Yet, these are important to know if you are serious about taking a position in the emerging e-gaming industry.
SPACs are not necessarily the most exciting companies by themselves. What creates the buzz is their mergers with potentially lucrative companies in red-hot market niches. Landcadia fits the bill as it is combining with a major player in online gaming.
Granted, there are other names in online gambling which you can invest in. Yet, those could represent crowded trades, meaning that the bulls may have already bid those stocks up too aggressively. It does not feel like LCA stock has had a bull stampede yet, but this could happen in the future.
I wouldn’t encourage anyone to buy LCA stock if I thought it was in a bubble.
Fortunately, I don’t believe that is the case with LCA. Growth in the company, and in the e-gaming market generally, could easily justify higher prices in this stock.
LCA Stock at a Glance
When you’ve looked at enough stocks, you can almost tell a SPAC simply from its price movement. LCA stock exhibits the typical trajectory of a shell company that goes from practically unknown to red-hot.
Thus, LCA stock traded in a tight, frustrating range in 2019 and the first half of 2020. During that span of time, bulls struggled just to get LCA above the $10 mark.
As we now know in hindsight, the coronavirus changed everything and made online gambling a popular pastime. Also this year, SPACs became popular among stock traders.
Consequently, an important merger involving the Landcadia SPAC and the online gambling market caused the LCA share price to shoot much higher. Indeed, by mid-September, LCA stock was gunning for the $18 level and the bulls looked ready to drive it much higher.
A Golden Nugget of an Investment
So, the big catalyst for LCA stock holders is that Landcadia is acquiring Golden Nugget Online Gaming (or GNOG). Billionaire and Houston Rockets owner Tilman Fertitta already owns both companies.
GNOG is a leader in the New Jersey e-gambling market. The company started its operations in New Jersey back in 2013 and became profitable three years later. In 2019, GNOG generated net income of more than $11 million.
Landcadia asserts that “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.”
I can’t confirm that GNOG is known in every U.S. household, but it is certainly a major player in a highly lucrative market.
Besides, it would be wrong to think that GNOG is limited in scope to New Jersey. In actuality, the company has plans to expand into additional states.
Subject to approval from regulators, GNOG plans to pursue its online casino business interests in Pennsylvania and Michigan in early 2021.
As Landcadia reports, the online gaming business has experienced a compound annual growth rate (CAGR) of 50% since 2014. And just as importantly for investors, GNOG “will become only the second pure publicly traded online casino company in the US.”
So yes, there are multiple ways to invest in the online gambling trend. However, with Landcadia, you are potentially getting a ground-floor opportunity with a well-known name that appears to be in expansion mode.
It took a major catalyst for LCA stock to break out of its shell. Granted, Landcadia is not the most famous name in online gambling. But the share price is on a bullish trajectory, and given the association with an e-gaming icon, Landcadia’s growth story might just be getting started.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.