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Posted on: June 12, 2021, 05:05h.
Final up to date on: June 12, 2021, 05:44h.
Todd Shriber Learn Extra
Quietly, PlayAGS (NYSE:AGS) inventory is one among this yr’s best-performing gaming equities, and one analyst is wagering there’s far more upside available.
PlayAGS headquarters in Las Vegas. An analyst thinks the inventory can double. (Picture: Las Vegas Overview-Journal)
In a current be aware to purchasers, B. Riley analyst David Bain initiated protection of the on line casino expertise and video games supplier with a “purchase” score and a $21 worth goal. That suggests the shares can practically double from the June 11 shut at $10.80. The analyst sees an array of catalysts doubtlessly driving shares of the Las Vegas-based firm larger.
We count on AGS’s product roadmap to substantively penetrate the $1.5 billion premium on line casino recreation phase, presently AGS’s whitespace,” mentioned Bain. “Additional, AGS’s high-margin, recurring income desk enterprise is underfollowed and undervalued, significantly given its 2H21 desk shuffler enlargement, in our view.”
The analyst’s bullish view on PlayAGS arrives at a time when some gaming equities are dithering. However that’s removed from the case for the maker of digital gaming machines and desk video games, amongst different merchandise. Helped by a acquire of 29.65 % over the previous month, PlayAGS is up 50 % year-to-date.
PlayAGS Inventory Highly effective Gaming Concept
With a market capitalization of just below $418 million, PlayAGS is among the smallest publicly traded gaming names within the US. That affirms its hidden gem standing, but it surely doesn’t diminish its potential efficiency for buyers.
PlayAGS inventory is very levered to energy in regional casinos as a result of 80 % of its recurring income comes from these venues. The corporate has practically 24,000 gaming participation models, that are present in casinos in regional markets and people closely frequented by locals. That tethers the shares to themes comparable to pent-up demand, rising charges of COVID-19 vaccination, and older gamblers returning to their favourite native gaming venues. In reality, some metrics for the corporate are already pacing forward of pre-pandemic ranges.
“1Q21 home participation per unit win exceeded pre-pandemic/1Q19 ranges, and checks cite continued win energy,” mentioned Bain. “Improved efficiency is pushed by sturdy host markets, pruning of lower-performing places/models, improved content material choices, and a brand new, larger mixture of premium recurring income recreation installations, in our view.”
PlayAGS: Catalyst-Wealthy Story
Even with the not too long ago stellar efficiency of PlayAGS, the gaming identify has ample tailwinds, together with an extended runway with which to develop market share within the premium video games phase.
“AGS’s premium recreation market penetration is properly underneath one %, leaving ample whitespace. AGS solely not too long ago started a substantive push into the premium phase, growing its base of premium models by means of the pandemic,” mentioned Bain.
If the corporate might drive its premium video games share to 3 %, that will be price $10 a share, which isn’t accounted for in B. Riley’s worth goal, in keeping with the analyst.
Including to the PlayAGS case is that even with the inventory’s current surge, it’s nonetheless cheap, buying and selling at 5.9x estimated 2023 enterprise worth/earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) in comparison with 9.1x for rivals. If the identify rerates to its peer group, it might commerce as much as $24, provides Bain.
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