The S&P/TSX Composite Index rose three points on April 11. The TSX Index has climbed nearly 15% in 2019 so far. In mid-December 2018 I’d asked whether gaming stocks were a good bet for investors as we looked ahead to the New Year. At the time I recommended investors consider adding both stocks we will look at today.
How is that prediction shaking out? Let’s dive in.
Stars Group (TSX:TSGI)(NASDAQ:TSG)
Stars Group is a Toronto-based gambling company that operates online, mobile, and land-based casinos. Shares of Stars Group have climbed 11.2% in 2019 as of close on April 11. Shares are still down 27.4% year-over-year as the stock has suffered a sharp retreat from the all-time highs it posted in the summer of 2018.
In November 2018, I focused on Stars Group and explained why it was a top target for me ahead of 2019. The legalization of sports betting in the United States is a huge development for Stars Group. The company has already moved to boost its footprint in states that have established legal sports betting, with more set to follow this year.
Stars Group is expected to release its first-quarter results in early May. Revenue grew to $2.03 billion in 2018 compared to $1.31 billion in the prior year, and gross profit jumped to $1.57 billion over $1.06 billion. In 2019 Stars Group forecast constant currency revenue growth between 8% and 12% and adjusted diluted net earnings per share growth of 10%.
Shares are still trading at the low end of its 52-week range. Stars Group last had an RSI of 61, putting it close to overbought territory after its recent rally. Investors may want to wait for the stock to take a breather and wait for an entry point, but I like shares priced below $30 to add right now.
Great Canadian Gaming (TSX:GC)
Great Canadian Gaming is a British Columbia-based company that operates gaming, entertainment, and hospitality businesses in Canada and the United States. Shares have climbed 2.7% in 2019 so far. The stock is up 45% from the prior year.
The company released its fourth-quarter and full-year results for 2018 on March 5. The addition of revenues from the GTA Bundle has powered growth at Great Canadian Gaming over the past year. It intends to push forward with massive investments in these properties, which should bode very well for its growth trajectory over the next decade.
Revenues at Great Canadian Gaming climbed 99% year-over-year to $1.22 billion in 2018. Adjusted EBITDA soared 113% to $474.4 million. Net earnings rose 180% to $239.8 million.
Great Canadian Gaming stock is currently trading at the high end of its 52-week range. The GTA Bundle will make this stock an attractive profit machine over the next two decades. The stock had an RSI of 41 as of close on April 11, which puts Great Canadian Gaming closer to oversold territory. This is a growth stock that’s worth stashing for the long haul.
