PlayAGS (NYSE: AGS) is one in every of right now’s top-performing gaming shares after Jefferies analyst David Katz highlighted it as a small-cap valuation alternative.
In a memo to shoppers, Katz upgraded the slot machine maker from “impartial” to “purchase” whereas elevating his worth goal on the corporate from $7 to $10, up 89% from its Could 12 closing worth. advised. The bullish remark contributed to PlayAGS’ share worth rally on Monday, with the refill 16.79% in intraday buying and selling already with quantity matching the each day common.
The rationale for the improve is that, after 2019 and the setbacks attributable to COVID-19, we’re doing higher than we’ve got within the final three years,” Katz wrote. “The (newest) quarter confirms the pattern that product momentum has been constructing over the previous few quarters and will proceed to speed up.”
PlayAGS struggled final yr, however its inventory is up 19.80% year-to-date and stays a favourite small-cap gaming inventory amongst sell-side analysts, a lot of whom imagine the inventory is undervalued. there may be The identify has a 52-week excessive of $8.40. Round $6.20 on the time of this writing.
PlayAGS inventory worth rise set off
Las Vegas-based PlayAGS just lately reported better-than-expected first quarter outcomes. This was supported by robust efficiency within the firm’s Digital Sport Machine (EGM) section.
“Our first quarter 2023 revenues exceeded expectations attributable to our increasing international buyer base and elevated EGM gross sales, notably in worldwide markets,” Katz mentioned. “Given the product traction, we see a chance within the valuation slip attributable to accelerated earnings.”
One other analyst mentioned final month that PlayAGS had a powerful begin to the second quarter and that the corporate has a strong outlook on buyer shopping for traits two to a few months forward. Wall Road expects the corporate to attain high-single-digit gross sales progress this yr.
With the gross sales and backside line momentum PlayAGS had within the first quarter, Katz believes administration will be capable of replicate that momentum going ahead.
“Our impression from administration is that future methods are supporting this acceleration. We imagine there is a chance to take action,” analysts mentioned.
PlayAGS shares supported by greater gross sales and decrease leverage
PlayAGS gives buyers different engaging attributes akin to elevated income and Earnings Earlier than Curiosity, Taxes, Depreciation and Amortization (EBITDA) and decrease leverage.
Earnings and changes are anticipated. EBITDA will proceed to develop and (and) take leverage and begin declining,” concludes Jefferies’ Katz.
The analyst did not point out that the consolidation of the gaming business is underway, and small-cap slot makers with authentic content material that may be leveraged in on-line casinos might be engaging targets.
In that regard, Impressed Leisure (NASDAQ: INSE) made a suggestion of $10 a share for PlayAGS final yr, however the deal fell aside as a result of Goal believed it was price extra. The deal led some analysts to invest that different patrons may embark on his PlayAGS, however no gives had been made public for months afterward.
