What Goldman likes about the Jumbo Interactive (ASX:JIN) share price

The Jumbo Interactive (ASX:JIN) share price has underperformed this year, but this major broker believes it could take off next year.
The post What Goldman likes about the Jumbo Interactive (ASX:JIN) share price appeared first on The Motley Fool Australia. –

rising asx share price represented by man with arms raised against blackboard featuring images of dollar notes

It has been a topsy-turvy few years for long-term shareholders of digital lottery business Jumbo Interactive Ltd (ASX: JIN). After surging from below $10 to almost $30 by October 2019, the Jumbo share price dropped off a cliff. The fall was precipitated by panic-selling as the spread of COVID-19 wreaked havoc across global share markets, and by March Jumbo shares had dropped back below $10 again.

Since March, the Jumbo Interactive share price has recovered slightly and is trading at $13.87 as at the time of writing. However, this is well short of the lofty highs of around $27 the company’s shares had hit back in October 2019.

But major broker Goldman Sachs Group still feels bullish about the prospects for Jumbo Interactive shares. The broker believes that most of the worst market conditions are behind Jumbo, and that it actually has some unique business opportunities over the next 12 to 24 months.

What Goldman likes about the Jumbo share price

One of the key items highlighted by Goldman was the recent deal struck between Jumbo and Western Australian Government-owned Lotterywest. Under the deal, which was announced back in November, Jumbo will provide its online software platform to Lotterywest, and will receive a 9.5% service fee for each transaction processed. The deal is for up to 10 years but can be reviewed in years 3 and 6 by Lotterywest.

According to Goldman, the successful integration of Lotterywest could provide Jumbo with significant tailwinds, and even lead to further domestic and offshore contract wins. Without providing specifics, Jumbo has flagged the potential for software-as-a-service (Saas) business opportunities across the United States eastern seaboard. The company was also recently granted a licence to supply its software platform to lottery operators in Great Britain.

While long-term shareholders will be pleased that Jumbo now has Goldman’s recommendation, they may be a little disappointed with the 12-month price target of just $14.50 the broker has put on Jumbo shares. This means that it could be a long time before the Jumbo share price is back within touching distance of $30.

Goldman does identify a number of key risks associated with an investment in Jumbo. Changes in gambling regulations are always a threat to the industry and could potentially disrupt Jumbo’s business model or even lead to increased competition by making it easier for new entrants in the lottery sector.

The other, potentially more obvious, risk is the possibility of Jumbo’s SaaS business falling short of expectations. A fair amount of the bullish outlook on the Jumbo share price is focused on the company’s SaaS runway, both at home and abroad. If the company can capitalise on the momentum generated by its Lotterywest contract, this will go a long way towards unlocking the value Goldman sees in Jumbo shares.

These 5 Cheap Shares Could Be Set For Huge Gains (FREE REPORT)

We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can find out the names of these stocks in the FREE stock report.

Click here for your FREE stock report

*Extreme Opportunities returns as of November 14th 2020

More reading

Rhys Brock owns shares of Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What Goldman likes about the Jumbo Interactive (ASX:JIN) share price appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!