NeoGames Stock Winning Ticket for iLottery Upside

NeoGames (NASDAQ:NGMS) stock soared Friday after the provider of internet lottery services reported first-quarter revenue that topped Wall Street forecasts while upping its full-year sales outlook.

Yesterday, shares of the gaming firm surged almost 10 percent on above-average volume. That s after the Israeli company reported net revenue of $21.6 million for the January through March period, beating the consensus estimate of $15.6 million.

Adding to the ebullience for the stock, NeoGames for the second time this year. The company now expects sales of $73 million to $77 million, up from a prior estimate of $65 million to $69 million.

We think there s some degree of conservatism relating to stimulus and stay-at-home tailwinds tapering as the vaccine rollout progresses,” said Stifel analyst Steven Wieczynski in a note to clients Friday.

He rates NeoGames a “buy,” with a $54 price target, up from $53. That new projection implies upside of 17.3 percent from the May 14 close.

Relative to operators in the online casinos and sports wagering arenas, NeoGames leads a nearly anonymous existence, because iLotteries aren t yet generating buzz on par with those segments.

However, some analysts with internet lotteries, noting that market could eventually rival that of online sports betting. Quietly, NeoGames stock is reflecting growth in an emerging gaming segment, as the shares are up 21.19 percent year-to-date. That s a far better showing than what s offered by any of the big-name, pure play iGaming and online sportsbook equities to this point in 2021.

Like operators in the internet casinos and sports betting spaces, NeoGames is a play on broadening legalization of its underlying business model something that s happening, though without much fanfare. The company is live in Michigan, New Hampshire, North Carolina, Virginia and the Canadian province of Alberta, among other international markets.

“In addition to the broad market strength we ve highlighted, management called out accelerating top-line growth rates in Virginia, with jackpot-related DBG demand converting over into instants play and accelerating the ongoing ramp trajectory,” said Wieczynski. “Management also highlighted their recently launched Alberta offering, which continues to outpace their expectations with further opportunities to broaden the product offering (e.g. draw games).”

NeoGames roster of states currently allowing iLottery is nearly equivalent to the number permitting , indicating there s growth to be had as states continue examining new revenue sources.

Reflecting that opportunity set, investors bid NeoGames stock higher by more than 24 percent over the past month, while iGaming and sportsbook stocks are being drubbed over the same period.

Some of the expected top line growth at NeoGames should happen soon, as Stifel s Wieczynski boosted his 2021 through 2023 revenue estimates by 12 percent, three percent, and one percent, respectively.