Amaya Inc. is cutting its 2015 full-year financial projections for revenues and net earnings, an adjustment that will naturally also lower expectations for per share profits.
Back in May, Amaya announced it expected to generate between CAD$1.446 and $1.564 billion ($1.09-1.18 billion) in revenue before the ball drops in Times Square on New Year’s, but is now warning shareholders to expect that number to come in around CAD$1.289 to $1.339 billion ($970 million-$1 billion).
The Almighty Dollar
Amaya is blaming the stronger US dollar as the culprit.
“The general strengthening of the US dollar relative to certain foreign currencies, primarily the Euro, has resulted in an approximate 19 percent decline in the purchasing power of our customer base,” Amaya CEO David Baazov said in a press release.
Baazov says that “purchasing power” has created a “significant negative impact” on revenues, “higher than we previously anticipated.”
Economists say when the fed raises interest rates, the US dollar typically follows and strengthens. That is bad news for companies that do business abroad as it makes everything more expensive.
Amaya is of course one of those international companies that operates around the world, its poker platforms catering to demographics in six of the seven continents.
Though Baazov and Amaya are slashing their estimates by 13 percent, Wall Street is doubling that reduction as shareholders dispose of their interests in the company.
In early trading on Tuesday, Amaya (NASDAQ: AYA) fell more than 27 percent to around $17, a drop of $6.50 per share. If there’s one thing Wall Street fears most, it’s uncertainty, and that’s what Amaya’s recent filing represents.
But not all hope is lost, as there are reasons to remain excited about the company for capitalists.
Amaya met analyst expectations for its third quarter. Revenues for the three months ending September 30th totaled $324.7 million, a $25 million increase from the same period in 2014.
“Since Amaya’s acquisition of its B2C business (PokerStars and Full Tilt), we have consistently delivered shareholder value,” Baazov said. “Despite multiple recent global challenges to our core business, we believe we are well positioned to increase our cash flow and continue to grow our customer base in 2016… ”
“Buy low, sell high” is the old adage of achieving success in the stock market. After this week’s news, Amaya is for sale lower than it has been previously valued.
Will it return to a valuation above its 52-week high price of $31.43? That is the challenge for potential investors.
Amaya is also crediting its delayed rollout of its new online sportsbook as another contributing factor to lower incomes. Additionally, Amaya ceased operations of its daily fantasy sports platform StarsDraft in all but four states in America as the legality debate continues to wage.
Along with PokerStars entering New Jersey, should the sports book get up and running in European countries and DFS find favorability among regulators in the US over the long term, Amaya could be posed for a rebound.