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GAN Limited: Profit From The Expansion Of Online Gambling With This 'Picks And Shovels' Play

Mar. 15, 2021 10:24 AM ETGAN Limited (GAN)22 Comments
Value Kicker profile picture
Value Kicker


  • GAN makes its money as a percentage of net gaming revenues generated on its platform. The US online gambling industry is growing rapidly.
  • GAN’s patented iBridge technology enables the integration of existing offline loyalty programs to the online platform. This makes GAN's product unique and very "sticky"
  • Coolbet itself is no slouch. The company has won numerous accolades and completes GAN's technology stack. The combined company is worth more than a sum of its parts.

I really like "picks and shovels" type investments and am generally bullish on the US online gambling industry. So you can imagine my delight when GAN Limited (NASDAQ:GAN) ticked both those boxes.

Qualitative Analysis

Just a brief background on the company, GAN is an enterprise software provider to the online gambling industry. It provides a complete SaaS-based solution including back-office and customer management that is enabling the casino industry’s ongoing digital transformation. GAN’s turn-key solution allows rapid deployment and scaling of new sites, games, and features which then, in turn, allows casino operators to focus on what they do best. The bullish case for the company is pretty straight-forward. GAN is your classic “pick and shovels” play and the gold-rush is the legalization of online gaming across the US.

The company’s potential customer base includes commercial casino operators and tribal casinos of which there are 465 and 514 respectively in 2019 in the US. GAN has about 101 retail outlets operated by its customers but is only generating a substantial amount of revenue from states where online gambling is legalized. Some of its most prominent clients include WynnBET by Wynn Resorts (WYNN) which I have covered here.

Unlike most other SaaS providers, GAN makes its money as a percentage of net gaming revenues generated on its platform. Therefore GAN’s growth isn’t limited by the number of casino customers it gets and is correlated to the growth of the industry. The US online gambling industry is growing rapidly and is forecasted to grow at a CAGR of 15.4%. Online gambling and sports betting are expected to be worth $17 billion and $14 billion by 2030.

In my view, GAN has several key competitive advantages. GAN’s code is built to handle multi-state jurisdictions and regulatory requirements. This is important as it makes it incredibly difficult

This article was written by

Value Kicker profile picture
Nine to 5 by day. Hobbyist stock trader by night. I got an MBA and a CFA ... so that should count for something. I only care about my own greedy interests and I love feeding trolls. Not your financial advisor. Information for entertainment purposes only. Diamond hands are forever.

Analyst’s Disclosure: I am/we are long GAN, WYNN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Caveat emptor! (Buyer beware.) Please do your own proper due diligence on any stock directly or indirectly mentioned in this article. You probably should seek advice from a broker or financial adviser before making any investment decisions. I don't know you or your specific circumstances, therefore, your tolerance and suitability to take risk may differ. This article should be considered general information, and not relied on as a formal investment recommendation.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (22)

28 Aug. 2021
Guys this company is amazing as long as countries are open without imposing any lockdowns. Saying so because for example in Europe, the europa league and champions league started and of course the most important leagues within each country. As long as countries are open, Gan will continue to make profits as a percentage of lost money by betting or by online/live casinos. And ket’s not forget that gambling is addictive similar to smoking or drinking or any other addiction. Coolbet as seen on their platform is licensed in Malta meaning that most of its customers are in Europe where the competition is fierce. Hopefully the US will legalize online gambling in more states because acquiring new customers in Europe is very hard and retaining them is harder. Anyone who wants to get a an idea of what I am talking about go open a vpn in the UK, France, Italy just to see the adds you get on any of the platform such as fb or utube. And if anyone wants to make sure of the potential is the US go and check out the GGR of some of the biggest names in online gambling like bet365 or WilliamHill. Its crazy.
26 Jul. 2021
Useful comments from all contributors. I been long on GAN since their SPAC merger. I don't understand why analysts continue to overlook international revenue. Revenue from the World Cup has the potential to dwarf that of the Super Bowl and Coolbet is an established leader in the international sportsbook market.
jning profile picture
Great after-hours news. Coolbet paying off big time.
I think there is a typo in this:

‘Coolbet was also acquired at a pretty good valuation of 6.3x and 3.5x enterprise value to revenues.’

Please clarify what those two numbers referred to
I am a little bit worried that most of the sportsbook revenue would go to DraftKings and FanDuel. GAN's clients, e.g. Wynn, have an extremely tiny share of the market.
In the US markets news is vital to support a company such as GAN. The Irish CEO in his statement did not give sufficient guidance for the recent integration of Coolbet and its mobile sports betting platform which gives GAN range over all aspects of the industry. Any good news now should rapidly bring the price up to former levels. GAN is a good speculative buy right now with support at the $17 level which could double in weeks.
OverTheHorizon profile picture
PENN CEO reports record March Madness online wagering:
Margus profile picture
Any news why its falling faster than a rock?
@Margus Gan Limited (GAN) downgraded to Hold from Buy at Craig-Hallum with analyst Ryan Sigdahl saying he believes a rising tide is lifting all boats in the online gambling sector, and while the analyst is a big supporter of the opportunity and investment theme, he thinks Gan has outsized risk over the medium-term relative to others. 2021-03-26 13:46:00 GMT DJ GAN Price Target Cut to $20.00/Share From $28.00 by Craig-Hallum
jcdidisheim profile picture
I'm quite excited owning shares of GAN who already returned the business to positive EBITDA, and I will add more in the coming days as I believe the stock price is an opportunity for a short period of time.

Had the announced patent licensing revenue been pulled forward into Q4, GAN's 2020 revenue results would have been on target with consensus estimates. But the 3 million licensing fee will only be recognized during the first quarter of 2021 instead of the fourth quarter of 2020, as previously anticipated.

I now hope that some intelligent important investors read yesterday's transcript. If so they would realize that GAN has an exceptional revenue growth rate and that their investment decisions in 2020, have already proven strongly beneficial in early 2021. They would realize that the capital investment cycle is largely behind and that 2021 revenues should exceed $100 million with strong full year EBITDA margins and a swift return to solid cash generation in the coming quarters.

Reading between the lines they would also understand that management highlighted that revenue projections for 2021 are primarily based on things that are already known and that management has a very high level of confidence with the revenue estimates for this year.

In 2020, 75% of the revenues were recurring in nature. In the U.S. recurring revenue grew 86% year-on-year.

"We are upgrading our 2021 gross operator revenue estimate in Michigan (only) up by 81% from $439 million to $795 million"

Management also somehow teased us that 2021 estimates would probably be revised (should I say upgraded ?) when reporting about Q1 who is now very well known. Q1 revenue guidance is firm at between $24 million to $25 million

In addition, a new prominent U.S. retail casino operator client was announced. Westgate Resorts, a major Las Vegas Casino and operator of the largest retail sportsbook in America, best known as the SuperBook.

My only fear is that an aggressive takeover attempt could be launched prior we enjoy a significant surge of the shares price.


I am and shall stay long GAN shares and do own GAN call options. This expresses my own opinion. This is not a formal investment recommendation. Do your own due diligence.
OverTheHorizon profile picture
@jcdidisheim Excellent JC—have to read more than the headlines and unknown “analysts”.
jning profile picture
@jcdidisheim Thanks for informative comment. Makes it easier to stay the course.
jcdidisheim profile picture
well ! this was not a good day !
Fire Sale Buyer profile picture
@jcdidisheim Its a good day for GAN in Arizona!
jcdidisheim profile picture
@Fire Sale Buyer

I like this very much also

ARK adding credentials to online gambling and Draftkings becoming very visible. Hopefully, Draftkings could be a client for Gan or, better, takeover Gan !
This is just speculation by me.

Following was on the Motley fool web site

Cathie Wood has made quite a name for herself over the past couple of years. The founder and CEO of ARK Invest can boast of unrivaled results for her five flagship exchange-traded funds (ETFs) last year, as each generated returns of more than 100% in 2020. Wood has a knack for identifying some of the most important disruptive and emerging trends and investing accordingly, making her one of the most watched names on Wall Street.

Over the past several weeks, both the ARK Innovation (NYSEMKT:ARKK) ETF and the ARK Fintech Innovation (NYSEMKT:ARKF) ETF have made several purchases of DraftKings (NASDAQ:DKNG). The fantasy sports and online gambling company went public less than a year ago after merging with a special purpose acquisition company (SPAC), but certainly meets the fund's goal of finding disruptive products and services. Maybe that's why Wood added roughly 1.75 million shares last week alone.
I must admit I initially had reservations about DraftKings, but there's no denying that the trend toward legal gambling is gaining steam. Online sports betting is one of the biggest gambling-related growth areas, and DraftKings is well-positioned to benefit from the trend.
For the year ended Dec. 31, 2020, DraftKings delivered adjusted revenue that grew 90% year-over-year, though losses surged 491% as the company scrambled to build out its user base and leverage its platform. This strategy is beginning to bear fruit: Its monthly unique players (MUP) grew by 29%, while the average revenue per MUP (ARMUP) increased 31%. This highlights DraftKings' ability to not only attract new users, but also increase the revenue it generates from existing users. 
DraftKings is active in a dozen states, more than any rival, as it continues to reach critical mass. This is still a somewhat risky bet, but with the tailwind of legalized gambling and online sports wagering, the company could be among the biggest winners in the space. 

NY will not go at it alone. Sadly, GAN no longer derives revenue from FanDuel sports but still does from its online casino offerings. It’s clear though that more states will legalize sports betting than online casinos so that’s a headwind to consider. Tailwind: Churchill Downs and Parx casino are two other sportsbook clients.
Value Kicker profile picture
@SilverBandit Cuomo seems to be leaning in that direction. Socialist California too. They need the money.
Love $GAN, thanks to the articles in this space I discovered the power of GAN. I also like its recent voting to approve employee stock compensation, which to me shows they will encourage company internal growth. They also partnered with Seneca Gaming out of NY and multiple partner launches in Michigan. $GAN is also waiting for authority authorization for one of its partners for sports betting in VA, which has been issuing licenses/approvals. This sector will explode with one more major state joins the gambling halls.
Fire Sale Buyer profile picture
Thanks for the note! I am very long, bought heavy around the time of the CoolBet announcement, staying long with state budgets seeing pressure & in dire need of new revenue streams. Sad thought but we know at least some stimmy checks are going into gaming. Appreciate your omnichannel comments, reminds me of good ol' Manhattan Associates $MANH for retailers. Looking forward to making more money with you on GAN!
jcdidisheim profile picture
Thank you
Good Paper
I would just add one point
I believe GAN is a very good TAKEOVER target in addition to all other rational behind your paper and me being long on GAN
Fire Sale Buyer profile picture
@jcdidisheim Agree! -- Mario Gabelli made this comment for Barron's back in January: “We like GAN, a B2B provider of iGaming and sports-betting infrastructure and services to sports books like FanDuel and WynnBET. The company came public last May and is trading for $20. There are 38 million shares. GAN earns a percentage of the gaming revenue that its sports-book customers generate, so its revenue grows with theirs. We expect GAN to continue signing new client engagements as more states legalize sports betting and iGaming. Eventually, we believe GAN will be acquired at a significant premium to its current price."
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