Online gaming stocks got hammered yesterday on the news that Congress passed a law to shut down online gambling in the United States. But if you own shares of Cryptologic
Now, I'm not interested in the politics of it all, but rather in investor reactions to the news. After all, 20% to 50% drops are substantial. And the vital questions become: Were they warranted? Or is this one of those times when fortunes are made?
The people speak.
According to investors tracked in our Motley Fool CAPS database, in the case of Cryptologic, the share-price plunge was emphatically undeserved. Of the 68 opinions that have been offered since yesterday, 58 of them are bullish. And the reasons to be bullish are good ones:
- Cryptologic is now trading for less than two times cash per share.
- U.S. revenues account for just 30% of Cryptologic's total revenue.
- Future growth will come from Asia.
- U.S. gamblers will find ways to work around the new law anyway.
Moreover, if you were skilled enough to catch Cryptologic at its $15.24 low yesterday, you've already seen a nice 10% bounce. That's not to say that Cryptologic won't be volatile going forward, but it does show the value in being able to remain reasonable when the market is violently overreacting.
Testing our thesis
Surprisingly, large landed casinos such as Wynn Resorts
Moreover, each of these three casino giants is currently operating and/or building expansive resorts in Asia. Indeed, the Asian growth catalyst that bullish investors are citing in Cryptologic's case is very real. One would think that Cryptologic's increasingly diverse revenue stream would have saved it from such a significant drop yesterday. Alas, it did not -- but that may mean opportunity for savvy investors.
To cap things off.
Of course, if you disagree with the Cryptologic bulls, be sure to make your opinion known in CAPS. Although the database is still in beta-testing, it's the only place in the world that tracks both professional and individual investors to make sure that everyone has access to market-beating investment ideas. If that sounds like a tool worth checking out, it's easy to get started.