As the demand for casino activity and consumer expenditure on gaming continues to remain strong, it may be wise to consider investing in stocks of slot machine manufacturers. According to Macquarie analyst Chad Beynon, International Game Technology (NYSE: IGT), Light & Wonder (NYSE: LNW) and PlayAGS (NYSE: AGS) are top contenders in this sector.
Suppliers of these machines are confident in the trends they are seeing, as replacement orders for 2022 were essentially the same as in 2019, which was a record-breaking year. Additionally, while legislation delays may slow the growth of iGaming content in the near future, businesses are still optimistic about future opportunities.
Light & Wonder, located in Las Vegas, and IGT are two of the leading North American slot machine providers, and they are both benefiting from increased visitation to casinos and an ongoing slot upgrade cycle. IGT is particularly noteworthy, as they are behind the iconic Wheel of Fortune series. Furthermore, they have a dominant lottery business and potential growth opportunities in the iGaming and sports wagering spaces.
Analysts have observed that IGT’s lottery arm may not be getting the recognition it deserves due to the company having other operations. This has caused some to suggest that IGT is getting a conglomerate discount, as lottery assets are desirable investments yet may not be fully appreciated.
PlayAGS has seen an impressive 38% increase in stock prices so far this year, and Beynon predicts there’s more room to grow. The Las Vegas-based slot maker recently announced plans to lower their leverage to a range of 3.25x to 3.75x, which was met with approval from Wall Street. With 70% of their business model recurring and domestic installed units in a good place, the company is well-situated to experience growth in unit sales, premium installed placements, table revenue, and game content/deals.