Gaming Industry not yet Reflecting Recession, Says Analyst

Recent GDP data paint a picture the US economic system is already encounter the traditional definition of a recessional — 2 sequent quarters of electronegative maturation — but if the recent Global Gaming Expo (G2E) is an accurate indication, the gaming industry isn’t yet intuitive feeling contrary effects.

Following meetings with industry direction teams at G2E, Philip Milton Roth Washington psychoanalyst Black Prince Engel noted inward a describe that casino operators aren’t showing signs of porcine gaming revenue (GGR) worsening and those with footprints on the Las Vegas Strip are constructive on their outlooks for the next several quarters due to the spate of marquee events header to the US gaming hub.

Operators and suppliers echoed sentiment from recent quarters that gaming exact remains uniform with prior months,” wrote the analyst. “This holds crossways regional socio-economic class II and III markets, as substantially as the LV Strip, but at that place is potentiality for choppiness inward LV Locals.”

He said the most noticeable alteration has been how operators are allocating capital. After several quarters of surging part buyback activity, cassino companies are now focusing on sliver debt due to rising interest rates.

Attractive Valuations, Bullish on Golden Entertainment

Amid recession fears, persistent rising prices and soaring interest group rates, gaming stocks of all stripes are beingness taken to task this year.

However, there are some benefits inwards that scenario, including opportunities for market participants with long-term clip horizons to get mired with some gaming names that are trading at cyclical low-pitched valuations, as Engel points out.

Among the casino operators the psychoanalyst is bullish on is Golden Entertainment (NASDAQ:GDEN). The Grand Canyon State Charlie’s manipulator doesn’t consort a Strip venue, but its Strat benefits from higher Strip traffic. Engel said the electric current canton could be the Strat’s topper since before the pop out of the coronavirus pandemic.

“The LV Strip normal schedule is approaching pre-COVID levels, where SEMA inward Nov and CES inward January should rise industry results. Meanwhile, Mar testament do good from two weekends of March Madness on the LV Strip. Formula 1 is also a major catalyst in 4Q23, followed by the Super Bowl inwards 1Q24,” according to the analyst.

He rates Golden “buy” with a $55 cost target, implying upside of almost 31% from today’s close.

Supplier M&A Could Perk Up in 2023

Another trend to monitor with 2023 lurking is the possibleness of increased consolidation inward the gaming supplier space.

That thesis was tried inwards August when Inspired Entertainment (NASDAQ:INSE) offered $10 a percentage for PlayAGS (NYSE:AGS). Those talks in the end felled seam apart, but Engel believes that could place the microscope stage for more mergers and acquisitions activity in the blank next year.

“Suppliers believe 2023 canful meet/exceed 2022, as the replacement rhythm to the full recovers, with potency upside if GGR does non weaken inwards a recessive environment. M&A was another musical theme during the conference, peculiarly after INSE call for AGS inward Aug. Chatter at the conference suggests private valuations are starting to constrict towards public ones, which could leading to an uptick inward M&A for the group, particularly INSE,” noted the analyst.

He believes UK-based Inspired will carry on mulling takeover opportunities in the US and rates both that inventory and PlayAGS “buy.”