Gaming equipment and technology provider PlayAGS entered the public market arena with a bang at the end of January. The investment community took notice this week.
Three Wall Street firms initiated coverage of the Las Vegas-based manufacturer with a “Buy” rating for the stock, which has been trading $3 to $4 higher than its initial public offering price. A fourth initiated coverage with a “Hold” rating, but still upped its view of the stock price.
“We believe PlayAGS has exposure to several catalysts alongside a healthy gaming backdrop,” Macquarie Securities gaming analyst Chad Beynon wrote while initiating a buy rating of $25 per share. Beynon cited the company’s expansion into Mexico, the Philippines, and potentially Brazil as possible revenue drivers.
PlayAGS, which was founded in 2005 as AGS, has historically provided slot machines, video bingo machines, and other electronic gaming devices to the Native American gaming market. The company maintains an approximately 20 percent market share of all Class II games.
PlayAGS recently expanded into the commercial casino market, where it currently sees a 4 percent market share, according to analysts. Beynon and other gaming observers predicted that share will increase.
“Alongside top-tier product performance, PlayAGS has built a backlog of orders, and we assume that this business doubles in two years,” Beynon said.
The company’s IPO entered the New York Stock Stock Exchange at $17 per share, above PlayAGS’s original pricing of $16 per share. On Tuesday, shares closed at $19.74, down 21 cents or 1.05 percent.
Deutsche Bank gaming analyst Carlo Santarelli placed a $23 price per share on PlayAGS and Steve Wieczynski of Stifel Nichlaus placed a $24 per share target on the company. Both analysts joined Beynon with a “Buy” rating.
Jefferies Gaming analyst David Katz placed “Hold” rating on PlayAGS with a $21 price target, telling investors he did not see much room for the stock to increase in value. Shares, he said, are up 24 percent since the IPO, which reflects “reasonable expectations.”
Santarelli compared PlayAGS to the revival of slot machine manufacturer MultiMedia Games in 2010, which overcame financial troubles and become one of the “up and coming” slot machine providers. It is now part of Everi Holdings.
He said equipment from PlayAGS’ has shown strong game performance relative to house averages and there has been strong demand for its hardware. With gaming products now in the early stages of development, there are opportunities to roll out into new jurisdictions.
Wieczynski hinted PlayAGS could acquire some smaller manufacturers over time and there was also for room growth in many existing gaming markets. Still, he said expects the company’s business in the Indian gaming market to account for a “significant portion” of its future growth.
