PlayAGS Poised to Gain Slot Machine Market Share

Gaming device maker PlayAGS (NYSE: AGS) reported third-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) that beat out Wall Street estimates. And, spell the gillyflower is sliding on Wednesday, some analysts remain offbeat on the shares.

In a tone to clients, Stifel analyst Jeffrey Stantial reiterated a “buy” rating on PlayAGS with an $11 price target, implying an upside of 57% from the Tuesday close. He sees several possible catalysts for the stock, including the on-going slot simple machine rise cycle.

Results and commentary suggest continued takings on management’s re-tooling of the one-armed bandit business, with quarterly growing in premium leased units accelerating and expansion slot shipments outpacing consensus,” noted Stantial.

Casino visitation trends are warm crossways the US, compelling operators to expand the one-armed bandit upgrade cycle, owing to the heights margins offered by gaming machines. Specific to AGS, the companion is adding market share and derives 70% of its sales from recurring revenue streams.

PlayAGS Shares Have Big Potential

Entering Wednesday, PlayAGS carry was higher past 2.21% year-to-date – just for 1 of the best showings among all gaming equities.

That despite the trials and tribulations endured by the broader small-cap cosmos and the stock’s Sep slump, which was mostly attributable to intelligence that prospective wooer Inspired Entertainment (NASDAQ: INSE) halted takeover talks it previously commenced with the Las Vegas-based company.

In August, Inspired Entertainment offered $10 a part inward hard cash for AGS, valuing the butt at $370 million. That’s wellspring in a higher place AGS’s stream marketplace capitalization of $251.23 million. While a scuttled takeover usually weighs on shares of the gillyflower — and that happened with PlayAGS — there are signs of impulse inwards the company’s business.

“Commentary at this year’s G2E, both from direction and customers, suggests impulse inwards game ops (in special premium) should stay into 2023 with unanimous content shown for the Hunter Curve Premium and expansion into high-denom (a key purpose of T12M R&D investments) broadening the product portfolio,” added Stantial.

PlayAGS Offering Compelling Valuation

Small-cap stocks, no matter of sector, usually craft at insurance premium valuations comparative to large-cap peers. That’s simply the terms of admission for accessing the superordinate ontogenesis rates offered by smaller companies. However, small-caps are trading at noticeable discounts this yr and PlayAGS is portion of that trend.

Shares have outperformed the group since Q2 earnings, though even allay trading at a wide-cut price reduction to peers (~5.25x 2023E Adj. EBITDA),” noted Stantial. “Valuation remains solidly dislocated from recent performance, and forecasted market place portion trajectory into 2023 (based on our anecdotal checks), and hence we reiterate ‘buy.’”

Additionally, there’s conjecture that PlayAGS remains a compelling acquisition and that it could be holding undisclosed talks with other suitors, but that hasn’t been confirmed as of yet.

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