Posted on: October 27, 2021 Posted by: Robert Davis Comments: 0

Posted on: Oct 27, 2021, 11:30h. 

Previous updated on: Oct 27, 2021, 12:57h.

PlayAGS (NYSE:AGS) is soaring, rating as one particular of Wednesday’s finest-undertaking gaming equities. That’s immediately after a sell-side analyst reported the inventory can far more than double as the gaming supplier’s cost-free funds flow (FCF) and set up foundation increase.

AGS stock
PlayAGS shares are soaring. An analyst thinks substantially far more upside is on the way. (Impression: PlayAGS)

In a notice to clientele currently, B. Riley analyst David Bain reiterates a “buy” score, with a $21 selling price target on PlayAGS. That forecast is additional than two and a 50 % moments earlier mentioned the stock’s Oct. 26 closing price of $7.99. Bain’s note is sparking a rally in the maker of digital gaming devices, with the shares up nine percent on over-normal volume in midday buying and selling.

We forecast 3Q21 to show AGS’ first sequential raise to its set up foundation since 3Q19, and we forecast its participation earn for every unit exceeding 3Q19 stages by ~20 percent,” writes Bain. “We also raise our BH22/CY23 totally free cash circulation (“FCF”) outlook by $2.2M for each quarter/$8.6M for each annum thanks to an predicted 2Q22 refinancing.”

The analyst adds that the a short while ago accomplished 3rd quarter should be the sixth consecutive period in which AGS tops earnings ahead of curiosity, taxes, depreciation and amortization (EBITDA) forecasts. The Las Vegas-based company reports September quarter final results on Nov. 4.

Tribal Buying Could Be Large Catalyst for AGS Stock

The bulk of AGS clients are in Florida, Oklahoma, and Texas — the former two property to some of the largest tribal casinos in the US.

Also, PlayAGS inventory is highly levered to strength in regional casinos, simply because 80 per cent of its recurring profits will come from all those venues. All those are positives at a time when regional and tribal casinos are carrying out effectively, with support from pent-up need. Bain claims AGS’ third-quarter installation base need to raise about 300 models from the second quarter, although notching a earn for every unit maximize of 20 % from the July by September period of time in 2019.

“Reasons for ongoing win energy incorporate: 1) Main-marketplace tailwinds (significantly Alright, TX, FL) 2) Install base self-pruning/cleaning with expanding high quality sport introductions/placements and 3) improving upon core match introduction momentum,” reported the analyst.

Core Orion Curve — 1 of AGS’ higher-end goods — and Aztec Chief, Captain Riches, and Lucky O’Reily are exhibiting strong in-subject benefits, according to Bain. The enterprise only a short while ago started off penetrating the top quality gaming equipment market, likely indicating that as it adds marketplace share in that phase, the inventory price could increase.

AGS Stock: Silent Out-Effectiveness

With a industry price of $294.9 million, AGS stock is firmly in modest-cap territory, and that might be why it’s missed relative to some bigger gaming names. Even with that, the shares are up 153 p.c about the earlier 12 months.

B. Riley’s Bain notes the firm defeat Wall Road earnings estimates in five consecutive quarters, with the impending report possible to mark the sixth these celebration. Moreover, a circumstance can be created that AGS presents some benefit — a rarity in today’s fairness market place.

“3Q21 need to also mark AGS’ first sequential increase to its set up foundation considering that 3Q19, and we forecast its participation get for each unit exceeds 3Q19 ranges by ~20%. Earlier mentioned, put together with expanding on line casino marketplace shopping for (AGS frequently regarded a on line casino provider ‘pure play’), features likely for AGS shares to re-fee from its 43%/47% enterprise worth/EBITDA low cost to the supplier peer group, in our see,” concludes Bain.