November 25, 2016
Where Will NYX Gaming Go From Here?
Heading into Q3 2016 earnings I was expecting to see positive movement from NYX Gaming (ticker NYX.VN on the TSX Venture Exchange). Everything was looking good until the company released Q3 earnings November 15 which saw the stock pull back nearly 30% over the next few trading days and hitting a new 52 week low at $1.12. Since reaching new lows only a few weeks ago the company has recovered and now trades at $1.44. But many investors may be wondering where will NYX Gaming go from here?
Looking at the 3 month chart above NYX Gaming has clearly been in a down trend since a run up after Q2 earnings. The company’s market cap currently sits at $154.4 million and during the last 10 trading days we have seen volume increase on the stock nearly 80% from a 3 month average.
Revenue for Q3 2016 was $54.4 million in large part from recent acquisitions made in previous quarters surrounding Open Bet. Compared to Q3 2015 this was a 308.9% increase in revenue. The company posted a net income of $41.4 million. The reason for a sell off after Q3 earnings may surround the company expenses. Administrative and Personnel costs nearly tripled compared to that of a year ago. The income recognized in Q3 was due in large part to the changes in fair market value of derivatives. This type of income generally doesn’t contribute to the core business structure for the company and may not show up in future quarters.
What does the future hold for NYX Gaming? I think we will continue to see increasing revenue as the company expands and acquires new customers. The online gaming space remains a growing industry as companies look to expand their reach on a global scale. NYX Gaming should benefit from both new product and game launches. Allowing time for the synergies between NYX Gaming and newly acquired Open Bet platform should allow for a decrease in administrative and personnel costs over time.
Patience may be a key factor for investors looking at this company. As we see increased revenue targets achieved this should allow for better evaluation metrics. Annual revenues may soon push above market cap which should also help investors price the stock more favorably.
My 12 month price target on NYX Gaming is $3.00.
Disclosure: I am long NYX Gaming.