Global Cash Access Holdings, Inc. (GCA)

A few weeks back, I came across Global Cash Access Holdings, Inc. (GCA) on one of my trips around the web, researched it, liked it….and then discarded it.  The stock was in a serious tailspin and I never like “falling-knife” stocks.  We all know those don’t usually end well.

But, it appears that the stock may have put in a bottom and the indicators are giving some credence to a rally.  It is a stock that given a longer time horizon might make for a good trade.  The stock is strong financially and after the hysteria about losing a big customer subsides, GCA could come back strong.

GCA (website) is a leading provider of cash access products and related services to over 1,100 casinos and other gaming properties in the United States, Europe, Canada, the Caribbean, Central America and Asia. GCA’s products and services provide gaming patrons access to cash through a variety of methods, including ATM cash withdrawals, point-of-sale debit card transactions, credit card cash advances, check verification and warranty services, and Western Union money transfers.

Why do I hate GCA? The few times I have been to a casino and needed extra cash, the exorbitant fees that companies like GCA charge tick me off.  I know they have to “make a buck”, but am too cheap to want to pay those fees.   However, that doesn’t stop them from making huge bucks from those fees to millions of willing customers.

The Fundamentals

GCA has strong fundamentals and that gives me confidence they have the ability to weather this downturn in their stock.  While L-T debt is high ($249MM), cash position and receivables are strong.  The company has good ratios and debt coverage is strong.  Cash flow continues to be strong.

The company is strongly profitable (although losing Harrah’s Casino at 14% of their overall business will hurt going forward).  Sales have plateaued during these tough economic times…which in some ways is a coup for the company.  They have maintained strong sales, margins and profitability during some difficult economic times.

The Chart

The Wild Card

Earnings are scheduled to be released Wednesday, August 4th.  I have read the analyst’s estimates and there appears to be no trepidation on the part of analysts.  We will see once earnings are released.  I have made the mistake of buying in anticipation of earnings and I don’t want you to make the same mistake.  We will see what happens once earnings are released.

Here is what I am looking at for entry/exit points

Last Close:              $4.35

Buy Opinion:          $4.00-4.75

Short Term Sell:   $6.00

Long Term Sell:     $8.00 and above

Good Luck and Great Trading,

Jeffrey Dean

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