Gaming supplier PlayAGS (NYSE:AGS) is connexion related to equities to the downside this year, but at to the lowest degree single psychoanalyst says retrenchment in the stockpile belies sturdy fundamentals.

Following a group meeting with management, Stifel analyst Jeffrey Stantial reiterates a “buy” rating on PlayAGS with a cost target area of $11, implying the stock put up roughly threefold from current levels.

Commentary on exact trends and manipulator sentiment was encouraging, and suggests the replacement round recovery thesis remains inviolate despite macro fears,” writes Stantial inwards a note of hand to clients. “Supply string disruptions are a headwind, though management cited some ongoing moderateness with recent actions (inventory build; increasing locker modularity) likely improving receipts perimeter resiliency.”

The analyst adds PlayAGS has potential for sturdy long-term margin enlargement as the companion grows into what’s an telling research and evolution profile.

PlayAGS Value Stock, Not Value Trap

With broader US equity benchmarks existence drubbed this year, plenteousness of stocks appear cheap, but some are time value traps.

In the grammatical case of PlayAGS, the slot machine manufacturing business appears to be offering credible value — so much so that Stifel’s Stantial argues the stock’s 20.32% year-to-date wane disconnects the identify from what are warm fundamentals.

“Overall we go on to prospect AGS’s outsized deduction to peers as to a greater extent technicals/factor driven than anything else, with valuation yet to snatch upward to AGS’s improved bedrock & earnings power,” notes the analyst.

That thesis is supported past a brisk step of new installations and sales at regional and tribal casinos, as operators renew their focus on high-margin gaming opportunities. On the premium machine front, PlayAGS installed more than 1,000 premium leased units since the death of 2020, boosting its part of that marketplace section to 11% from 4%. Additionally, the Las Vegas-based companion late proclaimed a debt refinancing that testament make unnecessary on yearly interest group expenses spell aiding in the quest to get net debt purchase to 4x.

Patience Could Be Virtue with PlayAGS

With the domestic gaming manufacture coming away its best number 1 quarter revenue showing on put down and signs that the momentum is trickling into the current quarter, investors are correct to ponder why cassino and supplier stocks are sagging.

Regarding one-armed bandit manufacturers, there’s a flake of a fall behind from installing to bottom dividing line benefit, but specific to PlayAGS, direction indicates in that respect are no more signs that operators are dialing backwards purchases of gaming devices.

“Given management’s commentary here, and our sustained vista that one-armed bandit purchases should prove more resilient to a potential decline inwards consumer disbursal than feared presumption down(p) slot reinvestment through and through COVID, we go on to panorama our constructive panorama on a slot replacement rhythm recovery in 2022 as intact and justifying upside to AGS shares,” concludes Stantial.