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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 considered one of this yr’s best-performing gaming equities, and one analyst is wagering there’s rather more upside available.
PlayAGS headquarters in Las Vegas. An analyst thinks the inventory can double. (Picture: Las Vegas Overview-Journal)
In a latest be aware to purchasers, B. Riley analyst David Bain initiated protection of the on line casino know-how and video games supplier with a “purchase” score and a $21 worth goal. That means the shares can practically double from the June 11 shut at $10.80. The analyst sees an array of catalysts probably driving shares of the Las Vegas-based firm increased.
We anticipate AGS’s product roadmap to substantively penetrate the $1.5 billion premium on line casino sport 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 growth, 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 achieve of 29.65 p.c over the previous month, PlayAGS is up 50 p.c year-to-date.
PlayAGS Inventory Highly effective Gaming Thought
With a market capitalization of just below $418 million, PlayAGS is without doubt one of the smallest publicly traded gaming names within the US. That affirms its hidden gem standing, however it doesn’t diminish its potential efficiency for buyers.
PlayAGS inventory is very levered to power in regional casinos as a result of 80 p.c 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 reminiscent of 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 power,” mentioned Bain. “Improved efficiency is pushed by robust host markets, pruning of lower-performing places/models, improved content material choices, and a brand new, increased mixture of premium recurring income sport installations, in our view.”
PlayAGS: Catalyst-Wealthy Story
Even with the lately stellar efficiency of PlayAGS, the gaming title has ample tailwinds, together with an extended runway with which to develop market share within the premium video games phase.
“AGS’s premium sport market penetration is nicely underneath one p.c, leaving ample whitespace. AGS solely lately started a substantive push into the premium phase, rising its base of premium models by means of the pandemic,” mentioned Bain.
If the corporate may drive its premium video games share to 3 p.c, that will be price $10 a share, which isn’t accounted for in B. Riley’s worth goal, in line with the analyst.
Including to the PlayAGS case is that even with the inventory’s latest 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 title rerates to its peer group, it may commerce as much as $24, provides Bain.
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