Turbulent markets may rattle investors, but they don't slow down excellent companies making potentially massive deals. And
In fact, investor response to the news was excellent, with shares rising nearly last week before political unrest reigned in prices of growth stocks across the board. Still, what investors need to remember is that while the stock may have given back some of its impressive gains, the news has enough accretive impact to be back in focus once broader market sentiment improves. Hence, the decline, likely short term, presents an opportunity that may be short-lived. Frankly, with markets turning green on Friday, that window of opportunity may be closing even faster than expected.
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Of course, there are already plenty of reasons to justify a closing of the valuation disconnect. For one, its new exclusive agreement with T-Mobile to reach a technologically-savvy, captive, and targeted audience, which already demonstrates high engagement and conversion rates, adds more firepower to an already compelling LTRY value proposition. Not only that, its new deal with Algorand can be significant, too, and shows LTRY understands the importance of being a next-gen provider. They were also wise in their choice, selecting Algorand to help secure and protect its competitive position in a substantial gaming market expected to migrate to the blockchain due to its inherent transparency. The intent is to leverage Algorand technology to add a combination of high efficiency, low-latency, scalability, and security to its Project Nexus platform. Both deals are value drivers.
In addition, LTRY's strategic moves are happening at the right time and in the right market. In 2021, only about 7% of lottery tickets were sold online. And in a
Here's another thing to know. The current
Buying Into A Disconnect
That's not all. What's good for LTRY is likely good for its investors. And at current share prices, the opportunity to tap into a disconnect between share price and intrinsic value has never looked more attractive. In fact, the recent decline in LTRY shares looks to have more to do with sector weakness in wagering sites like
Actually, that presumption has merit, noting its Q3 filing has provided more reasons than not to pay close attention to the developing LTRY story. Part of the bullish proposition is built around LRTY scoring over
Keep this in mind, too. Organic growth isn't lacking, either, proven by revenues jumping by 38% compared to last year. That contributed to Net Income skyrocketing from a
Actually, LTRY guidance supports that assumption. Bullish commentary during their previous results call suggests that 2021 will close its books with more than
Remember, too, the "iLottery" market is gaining share in a climate where consumers are turning toward digital shopping alternatives more than ever before. And that shift in purchasing patterns isn't only about clothing, spirits, and food. Consumers are going digital for just about anything with a price. Lottery ticket sales included, and the more states that offer the option, the bigger the opportunity for LTRY.
Thus, from an investor's perspective, LTRY stock shouldn't be lower. Instead, by doing the right things at the right time, LTRY should be attracting the attention of growth stock investors that want exposure to a massive global market opportunity. The case for LTRY is made stronger by proving it can decouple from broader market weakness as investors search for quality growth stock investments in safe-haven sectors offering insulation from the more overall volatility. Price action on Friday shows that's the case.
Hiding Is Not An Effective Strategy
Indeed, hiding from volatility isn't a very compelling investment strategy; taking advantage of opportunities is.
Once approved to sell, LTRY acts independently of state lottery authorities and provides registered users access to legalized lottery games, either on the website or through its app. But it's more than just access. LTRY takes things a big step further by physically printing and securing purchased tickets on behalf of the user. Perhaps the better part of the platform from a residual revenue-generating perspective is that users don't have to withdraw winnings. Instead, they can be left in their accounts to use for other lottery games. Since LTRY makes money by selling tickets, having those balances, or at least a portion of them, inevitably drives additional sales, generates user loyalty, and most importantly, earns LTRY a commission. It's a vital part of the revenue-generating strategy.
Here's a more significant incentive for users to join
That's shown in a recent filing indicating that the average gross profit per user in 2020 was roughly
Printing Tickets Is A Winner, Too
The more excellent news for LTRY and its investors is that revenues should push significantly higher as users stay engaged with the LTRY platform. That's happening, with LTRY reporting that the average number of user transactions jumped from 11.2 to 12.4 compared to the same period last year. Not only that, an increase in tickets per transaction generated a corresponding spike in revenue per transaction by 16%, met by gross margins sending more dollars toward the bottom line.
More good news on the revenues front is that LTRY plans to launch proprietary iGaming products separate from its state lottery interests. Notably, by targeting additional billion-dollar market opportunities, revenues from that mission can be substantial. And with savvy investors buying forward-looking expectations, it may be wise to position ahead of updates on that initiative. After all, good news can help ignite a rally of significant proportions when dealing with a market that size.
Also, as noted, don't ignore the fact that significant revenue-generating firepower is being added to the LTRY investment proposition exploring a blockchain platform that they call "Project Nexus." Now, with Algorand on board, the intent is to accelerate penetration into the broader iGaming industry by integrating digital tickets, sweepstakes, and enhanced API capabilities into its services. Again, just as news from its iGaming initiative can inspire a rally, so can an update of this potentially lucrative endeavor.
Keep in mind shares did react favorably to the news of adding Algorand, but fighting against headlines of an escalation of unrest in
A Valuation Disconnect Likely To Close
It would make sense for that to happen. At the end of the trading day, most apparent to the LTRY investment proposition is that its stock is disconnected from a valuation more appropriate to what they have already done and is about to do. Moreover, LTRY has justified its case to move appreciably higher and even provided a roadmap of reaching its ambitious goals in the coming weeks and quarters.
Part of that near-term surge can be generated from LTRY being in the right markets at the right time. Indeed, LTRY is. And remember, with only about 7% of the current
How fast can that happen? Well, if online wagering is a fair comparison, not long. In pretty short order, online wagering has earned the lion's share of a multi-billion dollar market, with recent data scoring that share at roughly 82% of wagers made.
Can an online lottery match that pace? Many say yes. And that position is supported by the expectation of online lottery ticket sales doubling over the next few years. That means companies well-positioned today and making plans for their future can meaningfully outperform those not paying attention to changing markets.
Disclaimers:
The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled.
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