Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Everi/IGT
The Feb. 29 announcement of Everi Holding’s merger with two International Game Technology units drew keen interest from analysts.
“We’re positive on the longer term IGT/Everi merger opportunity, but think near-term execution risks are real, and investors will have to wait almost a year for the deal to even close,” wrote Truist Securities analyst Barry Jonas in a March 1 statement. “We are downgrading both IGT and Everi to Hold (from Buy) as we think shares will likely be range bound in the near-term until investors get comfortable around integration and synergies, on top of an Italian Lotto renewal overhang. We lower our Everi 2024E/25E EBITDA -2%/-4% on earnings/guidance, and lower our Everi/IGT PTs to $13/$30 from $14/$32.”
“The announced merger of Everi with IGT’s gaming business presents a long-term strategic positive for shareholders, given importance of scale where Everi and IGT had ship share of 4% and 32% in 4Q23, according to industry sources,” wrote Jefferies analyst David Katz March 1. “In the near term, time to closing could exceed the end-2024/early 2025 target, given regulatory approvals, and therefore the shares could be tethered to a discounted value on the deal, or $13. Thus, we downgrade to Hold from Buy.”
Melco Resorts & Entertainment
J. P. Morgan analyst Joseph Greff, in a Feb. 29 note, commented on Melco Resorts & Entertainment’s recent conference call.
“We think the bigger takeaway is that because of lagging performance in Macau versus the market/peers, Melco is taking steps to change out senior Macau personnel to improve market share and get better lift from its relatively new offerings at Studio City and City of Dreams,” Greff wrote. “While the Chinese New Year this past month sounds like it was very strong for Melco (as it was for its Macau peers), with mass GGR up 22% this Chinese New Year period versus 2019, it doesn’t sound to us that it kept up with market in either January or post Chinese New Year.”
Boyd Gaming
Truist Securities’ Jonas March 4 also commented on a virtual investor call held last week with Boyd Gaming CFO Josh Hirshberg and Jake Mulcahy, Boyd’s Director of Corp Finance/Investor Relations.
“Management continued its cautious tone on possible macro impacts on the retail consumer and near time weather/construction disruptions, though was positive on the company’s core customer, its overall strategic positioning and long-term prospects,” Jonas wrote. “We continue to like risk/reward here with strong optionality and continued free cash flow generation/capital returns. Valuation is still cheap at ~6.9x our 2024E EBITDAR and ~12% free cash flow yield, despite Boyd owning the bulk of its real estate, and its 5% FanDuel stake. Remain Buy-rated with an $80 PT.”
Jefferies’ Katz discussed Golden Entertainment in a Feb. 29 note. “Mixed quarterly results were driven by increased labor costs and renovations at The Strat, which are expected to continue affecting performance in FY24,” Katz wrote. “However, the sale of several non-core assets will allow the company to reduce leverage in the near term and focus on capital returns and future M&A opportunities to drive growth. We look for a more defined path of growth to become more constructive on Golden. Maintain Hold.”
