NEW YORK (AP) — Shares of Global Cash Access Holdings Inc. rocketed 18 percent in heavy trading Wednesday, as the company's fourth-quarter earnings surpassed expectations, and an analyst sharply raised his target price and predicted that results for this year would exceed the company's own earnings guidance.
THE SPARK: Las Vegas-based Global Cash Access, which provides ATMs for the gaming industry, reported Tuesday night that its net income swung to $4.5 million, or 7 cents per share, in the fourth quarter from a loss of $259,000, or breakeven per share, in the final three months of 2010. The company acquired MCA Processing in November for an undisclosed amount. Fourth-quarter revenue was basically flat at $137.7 million.
Sterne Agee analyst David Bain said the results "beat recently-elevated investor expectations." He lifted his price target for Global Cash Access shares to $8.20 from $5.50. The company's fourth-quarter results were boosted by increases in cash dispensed; the acquisition of MCA Processing, which provided key Caesar's casino locations; and revenue from newly opened or expanded gambling locations, Bain said in a research note Wednesday.
Several new casinos due to open this year will help bolster Global Cash Access' earnings growth, Bain said.
THE BIG PICTURE: As the economy recovers, the casino industry has been strengthening. Companies like Global Cash Access stand to benefit from the rebound and expansion of casino gaming, experts say.
THE ANALYSIS: Sterne Agee has a "Buy" rating on Global Cash Access. Its price target of $8.20 is about 10 times its estimate for cash earnings per share for this year, 82 cents. That would be up 82 percent from 2011 cash earnings of 45 cents a share. Investors will increasingly come to see the company as a unique technology provider to the gaming industry, Bain said.
SHARE ACTION: Global Cash Access shares jumped 97 cents, or 18 percent, to $6.33 in early afternoon trading, after reaching a new 52-week high of $6.60 earlier in the session. Shares last touched that point in July 2010.