In Macau, gross gaming revenue (GGR) and visitation trends are showing modest signs of improvement.…
Posted on: July 20, 2021, 12:28h.
Final up to date on: July 20, 2021, 02:41h.
Todd Shriber Learn Extra
PlayAGS (NYSE:AGS) inventory is hovering because the broader market rebounds Tuesday. The inventory is up greater than 12 % on above-average quantity in late buying and selling.
PlayAGS slots machines featured in an investor deck, above. An analyst sees an enormous upside forward for the inventory. (Picture: PlayAGS)
Bullish motion within the shares of the on line casino expertise and video games supplier right now eats away at a lack of nearly 20 % over the previous week and practically 30 % over the previous month. As ominous as these figures are, at the least one analyst is sticking by the inventory, reiterating the view that it may possibly greater than double from present ranges.
In a word out Monday, B. Riley analyst David Bain reiterated a “purchase” ranking on PlayAGS, with a $21 value goal, whereas boosting his second-quarter earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) estimates on the identify. That 12-month value forecast implies the shares may practically triple from the July 19 shut. The analyst additionally factors out PlayAGS is deeply discounted relative to its peer group.
The 35 %/41 % valuation low cost is regardless of persevering with structural and geographic benefits versus most friends, newly minted traction within the $1.5B premium recurring slot phase, and new title energy within the for-sale phase,” mentioned Bain.
PlayAGS is among the smallest publicly traded gaming names within the US. That affirms its hidden gem standing. Nevertheless it doesn’t diminish its potential efficiency for traders. The corporate has a market worth of $305.71 million, placing it deep into the small-cap territory.
PlayAGS Inventory Resurgence May Be Afoot
Till lately, PlayAGS was considered one of 2021’s best-performing gaming equities. There are causes to consider the maker of digital gaming machines and desk video games can snap out of its current funk.
As Bain notes, channel checks with tribal purchasers, some jurisdictional gross gaming income (GGR) reviews, and different knowledge factors point out the corporate’s 80 % recurring income mannequin is outperforming estimates, as win per unit averages speed up to the upside.
“Contacts additionally cite continued premium sport installations, in addition to new title energy, within the for-sale class immediately forward of an acceleration in trade slot-buying from new budgets (sure main tribes have an October year-end, staging near-term slot shopping for finances will increase, in our view),” mentioned the analyst.
PlayAGS may supply traders some resilience in opposition to damaging market sentiment stemming from the emergence of the delta variant of the coronavirus pandemic. Bain notes the majority of the corporate’s prospects are in Florida, Oklahoma, and Texas — states unlikely to impose shutdowns.
Valuation ‘Head Scratcher’
In the meanwhile, gaming equities are broadly out of favor with traders, so discovering some valuation anomalies isn’t troublesome. Nevertheless, Bain describes the valuation state of affairs with PlayAGS inventory as a “head-scratcher.”
“We argue AGS’ mannequin resiliency has been confirmed out of COVID-19 and upside initiatives, resembling premium sport installations, are underway,” mentioned the analyst.
An enhancing steadiness sheet, which may result in annual curiosity financial savings of $7 million by 2022, bolsters the case for PlayAGS.
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