Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Thoughts on G2E
B Riley Securities analyst David Bain Oct. 13 wrote about meeting with companies at the recent Global Gaming Expo in Las Vegas, noting, “we believe gaming stocks are generally oversold. Unless there is a permanent sector re-rating lower (unlikely), many gaming equity valuations reflect forward EBITDA cuts that are highly implausible even in a potential forward softer macro environment, in our view.”
On International Game Technology, Bain wrote that “IGT 3Q and 4Q consensus estimates are relatively benign, given momentum in both its gaming and lottery divisions. In gaming, IGT continues to gain share in multi-level progressives after an R&D refocus on the segment a few years ago.”
For Everi Holdings, Bain thought that its EBITDA should grow next year, “particularly given new offerings and category launches, such as VLT (end of 1Q24). EVRI acknowledged already well-known challenges in its game division as it works to introduce new offerings, though it—and checks—cite nothing systemic.”
And for PlayAGS, Bain wrote that “We believe AGS is demonstrating continued game sales and gaming operation momentum, and 3Q will mark AGS’ fourteenth quarter of EBITDA outperformance. Further, while not explicit, based on company-specific trends, we believe AGS views CY24E 3.6% EBITDA growth estimates as potentially conservative (as do we).”
Virginia ban on skill-based games
The Virginia Supreme Court’s decision to reinstitute a ban on slot-like skill-based games in the state could be a meaningful benefit for Churchill Downs, according to Truist Securities analyst Barry Jonas in an Oct. 15 note. “We visited some Churchill Downs Virginia properties in late September,” Jonas wrote, “and noted roughly 9,000+ illegal SBGs could be negatively impacting revenues as Churchill Down bolsters its historical horse racing footprint in the state (~2,750 currently on path to 5,000). We see the state Supreme Court decision as a big win for the company just months following the Exacta transaction closing. This ruling comes four months after Kentucky issued a similar ban, and speaks to Churchill Downs management’s political savvy.”
MGM Cyberattack impact
David Katz, Jefferies equity analyst, Oct. 15 wrote about the recent cybersecurity attack that affected MGM:
“The estimated financial impact to the company is approximately $100 million of EBITDAR to the U.S. business, primarily the Las Vegas operations. Additionally, the company will incur a one-time expense of $10 million to pay for technology consulting fees, legal fees and other related expenses. Despite the disruption to operations, MGM is optimistic that cybersecurity insurance will be able to cover most of the expected losses. Our industry sources and checks are consistent with this expectation.
“Just part of the business. This event for MGM, as well as peer Caesars, presents a set of issues on how companies deploy resources to mitigate risk. In this instance, the event was the result of a single human error despite what we expect is considerable corporate focus on prevention training.
