PlayAGS (NYSE: AGS) stocks started Tuesday with an impressive year-to-date increase of 43.14%, making it one of the top performers in the gaming equipment market. After recent virtual meetings with PlayAGS CEO Dave Lopez and other executives, Stifel analyst Jeffrey Stantial remains optimistic on the stock, citing steady wagering trends, a strong product pipeline, and improved relationships with high-level customers, among other factors.
Stantial noted that the company’s geographically diverse recurring revenue model, conversations with operators, and monthly state-reported GGR data suggest stable wagering trends thus far in 2023. He reiterated a “buy” rating and $10 price target on the slot machine manufacturer’s stock, implying potential upside of 37% from the April 3 close.
Although PlayAGS is a small-cap growth stock, its market capitalization of $268.84 million means that the stock is still undervalued. The investment thesis is further bolstered by the expansion of tribal gaming customers in Florida, Texas, and Oklahoma.
Additionally, the company’s strong sales visibility of up to three months implies that the strong topline performance seen to start the year will likely continue into the second quarter. PlayAGS is also taking steps to reduce leverage and correct prior mistakes as a public company, such as investing in research & development and attempting to gain market share from competitors.
This has already started to translate into improved operating momentum, including shipping more than 4% of the market (excluding Canada and Oregon VLTs) for six consecutive quarters, seven consecutive quarters of more than 100 units of sequential growth in premium leased installations, and six consecutive quarters of over 20% year-over-year growth in table products adjusted EBITDA.
Overall, the positive developments at PlayAGS could support the stock even if casino operators cut back on slot purchases in the second half of the year due to difficult economic conditions.
