Stansberry’s Cloud Tease, part 2 — What’s that other SaaS-y Stock?

Checking in on Stansberry Venture Value's second "tech royalties" idea

By Travis Johnson, Stock Gumshoe, February 26, 2020

Yesterday we looked into the first “Hidden SaaS” cloud software stock hinted at in the ads for Stansberry Venture Value, and today, as promised, we’re on to number two… there’s also a third one hinted at, but the clues are pretty sparse on that one (so no promises).

Let’s just jump right in — what are the clues for this second stock?

“Opportunity 2: Not on the NYSE

“The second SaaS opportunity Bryan is sharing today is a tiny company… with a market cap well under $500 million.

“And like the stock I just told you about… you won’t find it on any list of SaaS businesses.”

OK, so similar to yesterday’s stock in that the “cloud” SaaS part of the business is somewhat hidden. What else?

“This stock isn’t listed on the NYSE or NASDAQ.

“All I can tell you is this company makes the ‘back office’ software for an industry that’s spreading across America, state by state, because of big legal changes.”

OK, so it’s a pretty good chance that this is a “hot” sector — probably either marijuana or gambling. What else?

“A brand new industry that’s growing at a blistering pace. In one legal state, revenues shot up 60% last year alone.”

OK not super specific. Some more clues, please?

“… you don’t need to pick one state or one business that’s going to dominate the industry.

“Because almost all the biggest players use this one, tiny company’s software.

“They’re essentially ‘locked in.'”

OK, so that’s the appeal of cloud services — it’s hard to cancel something once it’s embedded in your workflow and you come to depend on it. Kind of similar to the appeal fo subscription newsletter services, come to think of it, so I can see why a newsletter publisher would find it particularly appealing.

Other clues:

“This stock is a secret to U.S. investors today, but it’s not difficult to buy if you know how.

“But Bryan predicts it could be listed on a major U.S. exchange soon.

“When that happens — the secret will be out. It will show up for Wall Street analysts and money managers rushing into SaaS. And billions of dollars could flow in.”

OK, so if you read between those lines it’s probably not an unlisted company or an OTC company… it’s just a company that is listed in some other country.

And, of course, there’s the usual sky-high promise:

“He thinks it could reach 1,000% gains… and become a juicy buyout target for a larger SaaS company.

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“Which could continue delivering big gains in the years beyond.”

We also get a little catnip for your friendly neighborhood Gumshoe…

“Please understand… it’s no accident that I’m leaving out a lot of details about these opportunities.

“They are the best ideas we’ve uncovered… within the best group… within the best stock strategy Porter has ever identified.

“That makes them probably the most valuable opportunities we’ve ever shared in the history of Stansberry Research.

“And I expect them to be the best performers in our company’s history.

“So of course we’re guarding the details very closely. It wouldn’t be fair to Stansberry Venture Value subscribers to give away details that could reveal their names.”

That’s exactly the kind of challenge that gets the Thinkolator chugging… so what do we find?

Well, we can’t be 100% certain… they did keep it pretty light on the detailed clues… but I’m pretty sure the Thinkolator came up with the right answer for us here: This is likely GAN (GAN in London, GMMNF for very illiquid trading OTC in the US).

GAN is a gaming software platform, headquartered in London but primarily focused on the US (they do have other businesses in Europe, mostly in Italy, but that’s stable and not really growing, the growth is all in the US) — here’s how they describe themselves:

“GAN is a leading business-to-business (‘B2B’) supplier of internet gambling software-as-a-service solutions (‘SaaS’) to the US land-based casino industry. The Company has developed a proprietary internet gambling enterprise software system, GameSTACK™, which it licenses principally to land-based US casino operators as a turnkey technology solution for regulated real-money internet gambling, encompassing internet gaming, internet sports gaming and virtual Simulated Gaming.

And the big driver recently is online sports gambling, which has been legalized in several states and has been growing fast (I didn’t see an exact 60% growth number, but GAN’s key markets in Pennsylvania and New Jersey, which were early legalization states that offer online sports gambling, have posted growth numbers in that range pretty consistently each month recently).

GAN was actually in a “strategic review” a year ago, trying to figure out how to extract value from the company and probably sell it, but they got a nice surge of business because of the rapid growth in sports gambling (their first half revenues last year were higher than the full year revenue for 2018), so they decided to pull out of that possible sale process and move forward with seeking a US listing to better “create value” for investors.

And that’s where we are right now — they have filed a registration statement with the SEC for a US listing (just a few weeks ago), and they pre-reported their full year 2019 numbers at the end of January and noted that they think they’ll be “ahead of market expectations” with revenue growth of at least 115% and a positive EBITDA margin (after losing money on that measure in the previous year). The big catalysts, they say, have been the higher-than-expected surge in NFL betting in New Jersey and Pennsylvania in this first legal betting season for the most-bet sport, and the cross-sell of online casino gaming to sports bettors in those states, but they’re also getting boosts as new states come online (Indiana in October, for example). This is CEO Dermot Smurfit’s quote from that press release:

“We are delighted with our full year performance in 2019, which proved the long-theorized margin opportunity