Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
AGS model changes
David Bain of B Riley Securities November 3 looked at AGS.
“We adjust AGS’ CY24E EBITDA <1% lower and CY25E EBITDA <1% higher,” Bain wrote. “CY24E changes reflect slightly lower margins related to mix, while CY25E adjustments are driven by slightly higher market share assumptions given continued momentum across categories driven by its Spectra cabinet family (UR43 and UR49) and other products.
“We note AGS’ recent, successful introduction of its new mechanical reel cabinet, Revel, which offers upside to our CY25E estimates, in our view. On August 7, AGS received shareholder approval for its pending sale to Brightstar Capital Partners. As of November 1, AGS trades at a ~7% discount to the agreed $12.50 per share acquisition price. We do not see significant risks to AGS’ anticipated BH25E transaction close. Maintain Neutral.”
VICI’s outlook
Barry Jonas of Truist Securities November 1 looked at VICI Properties, calling its prospects “sleepy not spooky.”
“VICI reported adjusted funds from operations/share in line with us and slightly above the Street and narrowed 2024 guidance,” Jonas wrote. “Market volatility has weighed on deal flow and underwriting in the near-term, but there looks to be plenty in the pipeline for 2025 on top of growth via the Partner Property Growth and other loans.
“Tribal deals don’t seem imminent as management is still getting comfortable. We keep our 2024E adjusted funds from operations/share at the high end of the just updated $2.25-2.26 guide and maintain our 2025E. Reiterate Buy and $40 PT as we see VICI a key beneficiary to a potential pickup in M&A, while its cash flows/dividend have very limited risks.”
Election Day results to watch
Analyst David Katz of Jefferies November 3 noted gaming-related events worth watching on Election Day.
“Most notably, Missouri will be voting on Amendment 2 to legalize online sports betting by end-2025,” Katz wrote. “(including) comparatively low tax rate of 10%, deductible promos, and only one skin per land-based operator. Caesars has strongly opposed the measure given its multiple land-based properties, while DraftKings & Flutter are strongly supportive.
“Elsewhere, Arkansas is voting on Issue 2, which would revoke the authorization for a casino license in Pope County that was granted to Cherokee Nation Entertainment in 2018.
“Finally, a local referendum in Petersburg, Virginia, would enable a casino development by Cordish/Bruce Smith Enterprises. Although Petersburg is 25 miles south of Richmond and should have little impact there, we note that the Virginia market is becoming increasingly crowded, with the Norfolk/Boyd project near an existing Rivers casino in Portsmouth, with a number of Churchill Down’s Rosie’s historical racing machine facilities in southern Virginia.”
Ohio monthly report
“The Ohio Gaming Commission reported September land-based gross gaming revenues of $191.0 million, down 0.5% year over year (up 23% relative to 2019),” wrote J. P. Morgan analyst Joseph Greff October 31. “For the month, casino revenues decreased 2% to $81.6 million, and racino revenues were up 0.6% to $109.4 million. For online sports betting, revenues were $102.4 million ona handle of $842 million, implying a 12.2% hold rate (up 28 basis points), while promotions were $47.7 million, representing 5.7% of handle and 47% of GGR, versus 7.9% and 66% in September 2023, respectively.”