PlayAGS Stock Has Double Likely as Cash Movement, Installs Rise, Says Analyst
Posted on: October 27, 2021, 11:30h.
Final up to date on: October 27, 2021, 11:30h.
PlayAGS (NYSE:AGS) is soaring, ranking as 1 of Wednesday’s greatest-performing gaming equities after a promote-side analyst explained the stock can far more than double as the gaming supplier’s free of charge money flow (FCF) and set up base boost.
In a note to customers these days, B. Riley analyst David Bain reiterates a “buy” rating with a $21 price target on PlayAGS. That forecast is more than two and a half occasions above the stock’s Oct. 26 closing price tag of $7.99. Bain’s note is sparking a rally in the maker of electronic gaming machine with the shares up nine % on over-common volume in midday trading.
We forecast 3Q21 to show AGS’ 1st sequential improve to its set up base since 3Q19, and we forecast its participation win per unit exceeding 3Q19 levels by ~20 %,” writes Bain. “We also raise our BH22/CY23 totally free money movement (“FCF”) outlook by $2.2M per quarter/$8.6M per annum due to an expected 2Q22 refinancing.”
The analyst adds that the lately completed third quarter should be the sixth consecutive time period in which AGS tops earnings ahead of curiosity, taxes, depreciation and amortization (EBITDA) forecasts. The Las Vegas-based mostly company reviews September quarter final results on Nov. four.
Tribal Purchasing Could Be Massive Catalyst for AGS Stock
The bulk of AGS customers are in Florida, Oklahoma, and Texas — the former two of which are properties to some of the largest tribal casinos in the US.
In addition, PlayAGS stock is hugely levered to power in regional casinos since 80 % of its recurring revenue comes from these venues. Individuals are positives at a time when regional and tribal casinos are doing well with help from pent-up demand. Bain says AGS’ third-quarter installation base need to increase about 300 units from the second quarter whilst notching a win per unit enhance of twenty % from the July by means of September period in 2019.
“Reasons for continued win strength consist of: 1) Core-marketplace tailwinds (notably Okay, TX, FL) 2) Set up base self-pruning/cleansing with growing premium game introductions/placements and three) enhancing core game introduction momentum,” mentioned the analyst.
Core Orion Curve — one particular of AGS’ increased-end goods, and Aztec Chief, Captain Riches and Lucky O’Reily are exhibiting strong in-field results, according to Bain. The company only just lately commenced penetrating the premium gaming machine market, probably indicating that as it adds marketplace share in that section, the stock price could increase.
AGS Stock: Quiet Out-Overall performance
With a marketplace value of $294.9 million, AGS stock is firmly in little-cap territory and that may possibly be why it’s ignored relative to some bigger gaming names. Even with that, the shares are up 153 percent above the past year.
B. Riley’s Bain notes the business beat Wall Street earnings estimates in 5 consecutive quarter with the upcoming report probably to mark the sixth this kind of event. Plus, a situation can be made that AGS delivers some worth — a rarity in today’s equity industry.
“3Q21 should also mark AGS’ very first sequential improve to its set up base considering that 3Q19, and we forecast its participation win per unit exceeds 3Q19 amounts by ~twenty%. Above, combined with growing casino business acquiring (AGS typically considered a casino supplier ‘pure play’), delivers prospective for AGS shares to re-rate from its 43%/47% enterprise worth/EBITDA price reduction to the supplier peer group, in our view,” concludes Bain.