So in a LBYM world, this is my last day of my current 30-day trial, no more posts from me for a while. Become a Complete Fool
I want to leave everyone reading this board (and maybe the HGs board if they drop on over here) my thoughts on Cryptologic.
CRYP is undervalued right now. It is a buy. I'm hoping the price stays deflated for a bit more so I can pick some more up around the 20 level. Why am I so bullish? Let me explain:
-The company makes money. It makes a lot of money. It's a leader and has shown good growth of its revenues and profits.
-It is in an industry that is growing, and continues to make deals and win accolades in that industry
-It is a small cap that pays a healthy dividend and is most definitely in the value range of P/E and PEG ratio
-It is a Canadian company - since CRYP does make a lot of their money off of US dollars this might not make as much a difference, but they have operations in many places that are not dollar denominated. This is important for those who see the dollar's value dropping precipitously.
-Finally, this is probably the most important thing: The US will never ever be able to enforce an online gambling ban. EVER.
This last statement is a strong one, but let me explain. There are many things that happen online every day that are illegal. Downloading a song off a p2p network is illegal. Downloading a movie or a TV show is illegal. Gambling is illegal. Selling something and not reporting it to the IRS is illegal. Phishing is illegal. There are laws against hacking, cracking, and distributing serial numbers. All illegal. Spam is illegal. Mail-bombing - illegal.
This list can go on ad infinitum. The point is that these things happen, and no public government can ever hope to stop them. Curtail them temporarily - yes. But people still download music, movies, TV shows. People still spamblast your mailboxes and phish for your ID. Thousands of hackers and crackers reverse engineer programs and give you free access to them if you take the time and effort to use their tools. For every big federal bust you hear about on the news, what you don't hear about is the thousands of new things being put up on the Internet daily that no government can ever stop.
And gambling fits right along with this. Cryptologic, and the online gambling establishments, will not have their bottom lines hurt by any law or enforcement efforts. The music and movie industries carry far more weight than a few casinos who try to have online gambling banned - and so far they are pretty much useless in stopping illegal downloading.
So what to do as an investor? Simple: buy buy buy as much CRYP as you can when "bad news" hits. The earnings, dividend, and growth outlook are too spectacular to keep a stock like CRYP down, and it will pop right back up - just as it has done recently.
There is only one bearish issue with CRYP and that is their executive compensation package. Fortunately there are a lot of outside investors that vote down these horrendous un-shareholder friendly issuances (and I was proud to vote no on my position). But this is the only reason to be bearish on CRYP as I see it. Everything else from a fundamental level is spot on, and as I see it the online gaming community is immune to any US or US state law enforcement efforts.
Remember back about 6 years ago, the record companies filed charges against about a thousand kids that were using the Morpheus download services? They fined them all and made them do community service, then they put a dozen of those kids on a commercial. Do you think illegal downloading has been trimmed back at all?
Of course it hasn't. It has grown and continues to grow, and so will the gaming industry.
Second-quarter net income rose to $8.2 million, or 59 cents a share, from $4.8 million, or 33 cents a share, a year earlier. Revenue increased 52% to $30.4 million on strong organic growth in online poker software fees.
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So in a LBYM world, this is my last day of my current 30-day trial, no more posts from me for a while.
Become a Complete Fool