Posted on: December 16, 2022, 05:18h.
Final up to date on: December 16, 2022, 05:46h.
Having shed 25.63% of its worth this yr, PlayAGS (NYSE:AGS) is following different gaming system producers to the draw back this yr, and is without doubt one of the extra egregious offenders within the group. That’s not stopping no less than one analyst from waxing bullish on the moribund inventory.
PlayAGS slot machines seen in an investor deck. An analyst says the inventory has huge upside potential. (Picture: PlayAGS)
In a observe to shoppers at this time, B. Riley analyst David Bain reiterated a “purchase” ranking on PlayAGS inventory with a $14 value goal. That’s nicely above at this time’s closing print of $5.05. The shares are down 22.43% for the reason that begin of the fourth quarter.
The analyst just lately met with PlayAGS administration, noting he got here away optimistic on the corporate’s new Spectra 43 cupboard and potential alternative in Texas, amongst different elements.
AGS’ new Spectra 43 cupboard continues to carry out close to 2.8x home common at an increasing variety of areas. Its new high-denomination recreation launch, a brand new product phase for AGS, can also be outperforming. We consider AGS has a number of go-forward segments fills that would additional speed up market share good points over the subsequent 12 to 18 months,” wrote Bain.
On line casino visitation tendencies are robust throughout the US, compelling operators to increase the slot improve cycle owing to the excessive margins provided by gaming machines. Particular to AGS, the corporate is including market share and derives 70% of its gross sales from recurring income streams.
Texas May Be Lengthy-Time period Carry for PlayAGS Inventory
In June, the Supreme Courtroom dominated that the Ysleta del Sur Pueblo tribe can provide bingo video games on its reservation close to El Paso. There’s hypothesis that would open the door for that group and the Alabama-Coushatta tribe to finally open conventional tribal gaming amenities in Texas.
Whereas that’s a good distance off, some Texas lawmakers favor gaming growth and analysts are tantalized by the impression a market as huge as Texas may have on PlayAGS inventory. The corporate has established relationships with tribal operators within the second-largest state.
“We consider the Texas buyer will announce its growth by 1H23E. AGS ought to announce a long-term settlement for extra, participation items for the on line casino growth in the identical timeframe. Whereas the on line casino’s everlasting growth might not full till late CY24E, we consider a short lived growth with extra video games may come earlier than then,” added Bain.
The analyst factors out that the added recurring earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) stream in Texas may add $3 to $5 PlayAGS’ share value.
PlayAGS Inventory Low cost, Apollo Overhang Gone
Final month, PlayAGS introduced that non-public fairness agency Apollo International Administration (NYSE:APO) is promoting its 22% stake within the gaming firm. Whereas that information despatched the inventory tumbling, analysts view it as optimistic and elimination of an overhang that lengthy hindered PlayAGS inventory.
“With Apollo not a shareholder, AGS can add new jurisdictional licenses, together with Missouri, Colorado, and Minnesota, representing ~60,000 items. We consider there have been typical, short-term structural fairness hurdles following the mid-November secondary, however that a lot of it has run its course,” concluded Bain.
Moreover, PlayAGS is deeply discounted relative to its peer group. As Bain famous, the inventory trades at 38% low cost to 2022 and 2023 enterprise worth/EBITDA estimates.
