A Bunch of Stocks Getting Blown Up
Here are a bunch of stocks getting absolutely blown up over the last couple of weeks/months:

Visit highsandlows.substack.com to see more
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3 Special Situation Ideas in iGaming
iGaming, or “internet gaming,” digitizes the traditional casino, creating an online gambling experience offered through computers and mobile devices. iGaming products include conventional casino games like slots, poker, electronic table games, and live dealer table games. Online sports betting is an entirely different beast and does not fall under the umbrella of iGaming.

3 takeover targets in the space:

Galaxy Gaming $GLXZ
  • Trades at 12 times 2022 EBITDA. Growing topline ~30% with ~40% EBITDA margins
  • Activist investor disclosed 6% stake and launched proxy battle
  • Directors and Executive Officers own ~25% of Company
  • Litigation overhand resolved in 2021

  • Busted SPAC that missed overly optimistic projections floated during offering; now trading at 13x LTM EBITDA
  • ~25% owned by two public companies: $MGM (13%) and $ATVI (10%)
  • Close relationship with MGM (two of 6 directors have ties to MGM, commercial relationship, etc.)
  • CEO / Chairman is scooping up shares
  • Activist investor calling for change
  • Tendering for out-of-money warrants

Playtech LSE: PTEC
  • Simplification strategy resulting in 2021 sales of Casual & Social Gaming assets and financial trading division
  • Ongoing takeover saga likely to result in sale of Company or monetization of valuable assets

For your information:

Status of iGaming and Sports Betting Legislation by State

iGaming Generated 90% of Profit and 96% of Tax Revenue in Michigan

Full article:
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Private Company Valuations
Earlier this year I wrote that I was suspicious of rising private co. valuations. 2020 and 2021 witnessed extraordinary amounts of capital invested in start-ups, many of which achieving unicorn valuations despite high cash burn profiles and sub $100mm ARR.

ARK Invest wrote a piece recently about private co. valuations falling:

Additionally, the chart below illustrates the rising number of tech companies trading at lower IPO valuations compared to their final, late-stage private valuation:

Brad Gerstner, who I referenced before, published this awesome chart (below) highlighting that many tech company valuations have actually reverted to the mean and are trading at pre-COVID multiples (on average)

As I wrote previously, I think many of these start-ups that achieved lofty valuations over the last 2 years will end up getting acquired. The IPO market will not provide the valuation that founders and investors want, and it is rare to see investors allow a "down-round". However, we did just see that last week w/ Instacart, but there has been some back and forth about the terms of that deal relative to their prior raise.

I think it's generally safe to assume that many start-ups are overvalued and at a cross-roads. Going public is sub-optimal at the moment, and with continued multiple compression VC's will most likely not agree to terms that they were 2 years ago.

For some public companies, I could see take-privates or strategic M&A begin to ramp. We've already seen Casper get taken private at a MUCH lower valuation than its final private funding round (so much so that very few investors from when it was private broke even, let alone made a profit). Anaplan and Medallia were also taken private, both by Thoma Bravo.

Interestingly, though, we're see big tech get into tangential businesses relative to core operating segments. For example, gaming ($MSFT acquiring $ATVI), security ($GOOG acquiring $MNDT and Siemplify), and entertainment ($AMZN acquiring $MGM).

Although co.'s like Anaplan and Medallia develop helpful software, big tech seems to have its eye set on growth industries, not necessarily tools that can be rolled up and integrated into existing product features. For example, would it have made sense for Oracle to bid on Anaplan and leverage synergies b/w Hyperion and Anaplan? Maybe....but Oracle's latest large M&A deal was its acquisition of Cerner. I think many legacy tech behemoths are using the strength of their balance sheets to create ripple effects in new, innovative industries as opposed to continue building on top of what already exists in their ecosystem.

I would not be surprised if VC funding is down in 2022 compared to 2021 and 2020, and I'd also not be shocked if we start seeing layoffs or firesales for some of these high burn companies.
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Erick Mokaya's avatar
$103.3m follower assets
The Transcript this week:
In our newsletter this week:

🛒 E-comm still growing rapidly
💰 Signs of slowing in private capital markets
🍽 People are eating less at home again

IAC Acquire more MGM
$IAC set to buy another $200M in $MGM stock, taking their ownership stake up to 14.4%.

I remember I bought $MGM in the slump of covid for ~$15, sold it for ~$40 a year later, and then redeployed to $IAC (who had recently taken a stake in the business). Looks like I own more $MGM now :)
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The Earnings Beat Goes On: Daily Contrarian, Feb. 9
Good morning contrarians! Stock futures are green for a change, continuing the rally from yesterday. The Nasdaq is leading things, up 0.9% as of 0645. The S&P 500 is up 0.7% with Dow Industrials 0.5% to the good. The Russell 2000 which tracks small caps is up 0.4%.

Bonds are holding steady, with the 2-year yield at 1.32% and the 10-year at 1.92%.

Commodities aren’t doing much either. WTI crude is down about 0.7% to trade around $89/barrel. Gold is unchanged at 1,827/oz. Natural gas is continuing to drop though, down 2% to get closer to the $4 level (currently $4.17).

Cryptos are flat. Bitcoin is down about 1% to trade around $43,500.

In the after market we had good news from Chipotle ($CMG), which has rallied, and bad from LYFT ($LYFT), whose shares have been punished.

CVS Health ($CVS) just reported, beating earnings and revenue estimates. The stock is up 1% in the pre-market.

CME Group ($CME), Fox Corp ($FOXA), GlaxoSmithKline ($GSK), Yum Brands ($YUM) also report before the open at 0930.

The after market should be interesting again. Uber ($UBER) is expected to report at 1600, followed by Sonos ($SONO), Vimeo ($VMEO), and Disney ($DIS). We’ll also get Twilio ($TWLO), Mattel ($MAT), Zynga ($ZNGA), and MGM Resorts ($MGM) after the close.

The Bottom Line
A lot of volatility has left the market this week. Doesn’t mean it won’t return of course, but things are noticeably calmer. Futures being bright green was a cause for concern during the high vol days of last week and the week before, but it’s difficult to see where the catalyst for ‘risk-off’ could come from. Earnings don’t get interesting until after the close.

Yesterday's bottom line told you it was looking like a blah day but to keep an eye out because those days often turn out to be the most interesting. We ended up getting a rally in risk assets, with the Dow, Nasdaq and Russell all adding north of 1%. This may be a good indication the bull market is alive and well (which it is statistically, anyway) as stocks tend to rally for no good reason during bull markets.
Alberto Wallis's avatar
$23.3m follower assets
Upcoming Earnings Calendar (Feb 7th - 11th)
Hey guys!

A key week is ahead of us! Here's what I'm interested in:

  • $APPS - One of my largest holdings. I'd like an update on the progress of single-tap and the tests they were running with Meta $FB. I'm also interested in seeing how their device footprint is expanding after their latest deals.
  • $DIS - They've invested heavily on Marvel and Star Wars series for Disney+, so let's see if this translates to lower churn and higher growth.
  • $NET - Really interesting stock but the valuation seems too high. Let's see if there's a good opportunity to enter post-earnings.

Good luck!

If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.





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Erick Mokaya's avatar
$103.3m follower assets
In our newsletter this week that is free for everyone:

📉 The Fed begins tapering its asset purchases
🛍 Consumer confidence improving in emerging markets
⚡️ The world can count on fusion to meet its energy needs

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