Times are turbulent for gaming device manufacturer PlayAGS after it shed 63% of its value this year. The Las Vegas-based company hasn’t made a profit in the last 12 months – a hardship it shares with many other gaming product suppliers.
One investor sees a better future for PlayAGS
Texas commercial casinos are currently outlawed, but there’s optimism that Texas lawmakers could change that in the coming legislative session. Casino gambling in Texas could only help a company like PlayAGS, which specializes in designing slot machines.
Even as PlayAGS’s stock plummets, one analyst is convinced the company is still worth investing in.
David Bain, a Wall Street analyst at B. Riley Financial, sent a note to clients recently emphasizing a “buy” rating on PlayAGS stock with a price target of $14. Many would consider that overoptimistic given that the stock is currently trading at $4.57 as of Dec. 23, down 22.43% since the start of the fourth quarter.
Spectra 43 cabinet could be a game-changer
Following a meeting with PlayAGS management, Bain recognized an array of catalysts that could potentially drive shares of the company higher. These include PlayAGS’ new Spectra 43 cabinet and the possibility that Texas will legalize gambling in 2023.
In his investor report, the analyst pointed out that AGS’s new Spectra 43 cabinet was achieving nearly 2.8 times the house average at an increasing number of locales. The product, which AGS unveiled at the G2E expo in Las Vegas last September, features a 43-inch Ultra 4K portrait monitor, gaming-controlled eclipse, lightning, and V-Sync technology for seamless video linking when machines are banked together.
Bain’s report also underscored the continued success of the company’s most-current game launch, a new product segment AGS introduced in August. The new high-denomination, three-reel video games – Mega Diamond, Gold Inferno, Platinum 8x8x8x and 8x Crystal Bells – are thriving across casino floors. The new titles allow AGS to offer additional bet varieties and appeal to a wide range of players.
This comes at a time when casinos across the US are seeing an uptick in visitation, which in turn is pressing operators to extend the slot upgrade cycle. By doing so, AGS is adding market share and thereby deriving 70% of its sales from recurring revenue streams.
PlayAGS operates three separate segments
Formally known as AP Gaming Holdco, Inc, PlayAGS was incorporated in 2005. It designs and supplies gaming products and services for the gaming industry in the US and internationally. The company operates through three segments.
Electronic gaming machines
The electronic gaming machines (slot machines) segment offers various titles as well as EGM cabinets, including the Orion Starwall, Orion Curve Premium, Big Red, Orion Portrait, Orion Slant, Orion Curve, Orion Upright and ICON.
Also provided in this segment are conversion kits, which convert older game titles to new ones within that operating platform. The company serves Class II Native American casinos and casinos in Mexico. It also serves Class III Native American, commercial and charitable jurisdictions.
Offered in the second segment are table products, including felt table games, side bet earnings, progressives, card shufflers, signage and other ancillary table game equipment. It includes table technology related to blackjack, poker, baccarat, craps and roulette.
The segment also provides Dex S, a single-deck card shuffler for poker tables. Brands include In Bet, Buster Blackjack, Double Draw Poker and Criss Cross Poker.
The third segment offers a platform for business-to-business content aggregation used by real-money gaming and sports betting partners. It also offers social casino games through its mobile app, Lucky Play Casino.
Legal Texas gaming would benefit slot machine vendors
By and large, slot machines are the most popular games in a casino. This is why revenue generated from electronic gaming machines is so high.
According to the American Gaming Association, combined revenue from slot machines and table games in October at US casinos was $4.03 billion, or 76.02% of the total commercial gaming revenue. Sports betting grossed $8.047 million, or 15.2% of the total. IGaming revenues totaled $453.1 million (8.6% of the total).
If Texas legalizes casino gambling, casinos could see phenomenal revenue from slot machines. Companies like PlayAGS would greatly benefit from a new market for their slots and table games.