Why Shares of Multimedia Games Holding Company Inc Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Multimedia Games Holding Company Inc  (NASDAQ: MGAM  ) were dazzling investors today, gaining as much as 16% after announcing strong second-quarter earnings and an acquisition.

So what: The casino-gaming technology creator saw revenue improve 25% to $58.2 million, well ahead of estimates at $54.1 million, while earnings per share increased from $0.31 to $0.35, beating expectations at $0.31. An increase in the company's installed base of 9% drove a 13% increase in gaming operations revenue, and CEO Patrick Ramsey said the quarter showed off the company's "growing product portfolio, attractive competitive positioning and unique growth opportunities." 

Now what: Separately, Multimedia Games said it would acquire PokerTek, a maker of electronic table games, for $13 million. The transaction is expected to close by the end of 2014, and management believed the deal would begin adding to profits by 2016. Ramsey said eTables such as PokerTek's have become a "growing component" of casino gaming, and PokerTek is "an excellent complement to our existing business." Guidance for the full year was slightly below estimates as the company sees EPS of $1.23-$1.27 against the consensus at $1.28, but excitement about the PokerTek acquisition and promising revenue growth was enough to lift the stock. I'd say it looks like a solid long-term bet after today's report.

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