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Wednesday July 25, 2012 will be a big day in the world of gambling stocks as investors eagerly await earnings reports from both Zynga and the Las Vegas Sands.
Both companies were anticipated to either meet or exceed expectations with Zynga likely to enter the “real money” online poker realm while the Las Vegas Sands Corp. will build its presence in Macau and focus on emerging gambling nations like India and Vietnam. Ironically, The Las Vegas Sands Corporation is one of the few casino groups opposed to expansion online. CEO Sheldon Adelson claims he is “morally opposed” to such a move.
Zynga is expected to report a 24 percent gain in revenues for the second quarter while LVS was forecast to report an 11 percent increase in earnings per share, to 60 cents while revenue is expected to jump almost 19 percent for $2.783 billion. Both companies numbers were to come out after the closing bell on Wednesday.
Zynga shares currently trade about half their IPO price of $10 but received a 6 percent bounce on Monday following reports on Gambling911.com that the world’s largest free-play online poker company was already in the process of entertaining bids to offer a “real money” platform.
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Scott Devitt of Morgan Stanley wrote in a note Monday that Zynga investors “have priced in a miss,” maintaining his bullish overweight rating on the shares, though he lowered his price target to $12 from $13.
“We believe bears are overlooking positive data trends implying that reported users will be stronger than expected, and Zynga owners could benefit from a short squeeze if the company meets consensus expectations,” he said.
Rocco Pendola of TheStreet.com offered up even more reasons to be optimistic about Zynga:
The stock bucked a decidedly bearish trend to blow past the psychologically important $5 mark. Zynga reports earnings on Wednesday. If it beats, raises guidance or shows its hand a bit more with regards to online gambling, a move into double digits in short order is not out of the question.
As I explained in the above-cited article, Zynga has several strong constants -- no debt, massive revenue and a first-mover advantage -- as well as many potential catalysts that could burn traders and investors with short positions in the stock. There's no question that short covering fueled a good bit of Monday's move past $5.
- Aaron Goldstein, Gambling911.com Business
