GAN Stock Among Hedge Fund Manager Niles Top 5 Picks for 2021

Posted on: December 31, 2020, 09:57h. 

Last updated on: December 31, 2020, 10:17h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Recently resurgent GAN Ltd. (NASDAQ:GAN) is getting more fuel for its rebound, as a well-known hedge fund manager named the gaming technology provider as one of his top five ideas for 2021.

Dan Niles
AlphaOne Capital founder Dan Niles in a CNBC interview. GAN is one of his top ideas for 2021. (Image: CNBC)

Dan Niles, a founding partner at AlphaOne Capital Partners, is bullish on UK-based GAN for the new year despite some struggles for shares of the newly public company. GAN went public in early May, one of a slew of gaming companies to debut as listed entities this year. But over the past six months, the stock is lower by 26 percent. Still, the hedge fund manager likes the set up on the name entering 2021.

GAN, with their acquisition of CoolBets, now has an online sports betting offering to complement their iGaming products,” said Niles.

In November, the gaming software company said it’s buying Vincent Group Plc, also known as Coolbet, $175 million in cash and equity. The transaction, which is being funded with $95 million in cash and $80 million in stock, is scheduled to close in the first quarter. Investors appear fond of the deal because GAN shares are higher by almost 26 percent over the past month.

GAN Adding Growth

With the Coolbet purchase, GAN adds a fast-growing enterprise that bolsters its business-to-business (B2B) offerings. For the trailing 12 months ending November, Coolbet’s revenue jumped $31 million, good for a compound annual growth rate (CAGR) of 46 percent from 2018 to 2020.

Part of investors’ affinity for the deal may be the perception of GAN adding growth at a reasonable price. As a cloud computing? company operating in the scorching hot online casinos and sports wagering realms, GAN may appear richly valued to some investors. But Niles sees value with the name.

“The stock only trades at 8x calendar year 2021 enterprise value/sales versus some comparable companies that are over 20x,” said the hedge fund manager.

Importantly, GAN says the Coolbet acquisition will be accretive to earnings. The target has over 84,000 active customers in Canada, Peru, Norway, Sweden, Finland, Iceland, Estonia, and Chile.

Why It’s Notable

Of the five 2021 ideas pitched by Niles, GAN is the only one with gaming exposure. The others include JPMorgan Chase (NYSE:JPM) — the largest US bank by market value — technology giant Oracle (NYSE:ORCL), an energy fund, and an electric vehicle manufacturer.

Past performance isn’t a guarantee of future returns. But investors may find it notable that GAN makes Niles’s 2021 list because his 2020 quintet returned an average of 60 percent, and two of the names in that group — semiconductor makers Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) — more than doubled.

The bulk of GAN’s revenue is sourced from US-based clients, meaning that as iGaming and sports betting launches in more states, the company has the opportunity to capture more business, potentially providing a catalyst for the stock in 2021.