Posted on: February 7, 2023, 02:44h.
Final up to date on: February 7, 2023, 02:44h.
Fourth-quarter earnings studies from gaming expertise suppliers will quickly arrive and that has some analysts anticipating excellent news out of the trade.
In a brand new report back to shoppers, Stifel analyst Jeffrey Stantial highlighted a number of slot machine producers, together with Worldwide Sport Expertise (NYSE: IGT) and Gentle & Surprise (NASDAQ: LNW). Stantial boosted value targets on each names. The analyst notes trade gamers might ship vibrant forecasts for the primary half of 2023 with these outlooks turning extra prudent for the again half of the 12 months.
Whereas it’s unclear whether or not/how administration groups issue macroeconomic uncertainty into preliminary steering, our base case for the sector presumes steady tendencies by way of 1H23 with a extra conservative outlook for the again half of the 12 months,” wrote Stantial. “Regardless of a cautious medium-term outlook, we see alternatives inside the group.”
He took his value forecast on IGT to $31 from $27 and lifted his projection on Gentle & Surprise to $70 from $61.
IGT, Gentle & Surprise Have Tailwinds
The present working surroundings isn’t good, however there are tailwinds for gaming machine producers. These embrace shoppers remaining devoted to on line casino visits, which supplies operators with a lot wanted resiliency.
As Stantial factors out, slot machine makers are probably seeing some aid on the provision chain entrance, but it surely might take a while for margin advantages to accrue as producers work by way of final 12 months’s stock construct.
“Given the ‘discretionary’ nature of slot capex and historic cyclicality, we count on buyers proceed to cost in a significant contraction within the slot alternative cycle,” added the analyst. “Finally solely time will inform, although till wagering tendencies start to roll (if ever), we proceed to see steady replacements demand as an affordable base case in mild of depressed slot capex budgets in 2020/21 and stable product launched at the newest G2E throughout most main suppliers.”
Particular to IGT, that inventory might have tailwinds within the type of the corporate actively trimming debt, an under-appreciated lottery enterprise and its fast-growing iGaming and sports activities wagering unit, which could possibly be a candidate for a derivative sooner or later.
Gentle & Surprise can be parting debt in an enormous method and the corporate controls about 20% of the marketplace for each slot gross sales and put in base of premium slots in North America.
Bullish on PlayAGS, Too
Along with IGT and Gentle & Surprise, Stantial is constructive on a number of gaming tech equities, together with PlayAGS (NYSE:AGS). PlayAGS is rising its premium set up base and will see an enormous increase if on line casino gaming is expanded in Texas.
“Particularly, our checks counsel AGS ought to proceed to develop premium leased models in 2023, supporting combination sport ops yields progress even ought to wagering tendencies start to roll. Suggestions from varied operators additionally suggests AGS’s for-sale content material continues to resonate, suggesting latest MSD% ship share probably proves sustainable,” in line with Stantial.
He charges the inventory a “purchase” with a $10 value goal, implying vital upside from present costs round $6.60.