On Thursday, Truist Securities adjusted its outlook on Everi Holdings (NYSE:EVRI), a gaming company, by reducing the price target to $10 from the previous $11, while keeping a Hold rating on the stock.
The revision reflects the firm's analysis of recent mergers and acquisitions (M&A) within the gaming sub-sector, including Everi's announced combination with IGT and AGS's transition to a private company.
The firm's analyst cited the completion of anticipated M&A activities in 2024 as a factor influencing the new price target. The combination of Everi and IGT is viewed positively for long-term prospects, but the analyst anticipates that any significant increase in Everi's share value is unlikely until the integration process post-deal is complete.
The analyst also noted current challenges, suggesting that Everi may face earnings risks in the short term due to M&A-related disruptions and slower-than-expected product rollouts.
IGT's performance, specifically in the gaming and lottery sectors, is expected to be strong for the second quarter. However, the analyst indicated that no substantial updates are anticipated regarding the renewal process for the crucial Italy lotto contract. Additionally, discussions about MegaMillions potentially raising ticket prices in March—from $2 to $5—were highlighted. According to the firm's analysis, this price increase could significantly boost EBITDA, with an estimated incremental upside between $17 million to $50 million.
In other recent news, Everi Holdings Inc. has announced plans to merge with IGT's Global Gaming and Play Digital businesses.
The merger is expected to be finalized between late 2024 and early 2025, aiming to enhance product offerings and expand market presence. While the transition to new gaming cabinets and content has been slower than expected, positive trends are emerging with the company preparing to enter the Illinois VLT market.
Despite a decline in the Games segment, Everi's Fintech cash access services have seen growth. Adjusted EBITDA fell to $80.3 million from $92.5 million in the prior year's quarter. The company anticipates revenue growth and a return to growth in Fintech revenues in the second half of 2024.
InvestingPro Insights
Everi Holdings (NYSE:EVRI) has been navigating through a dynamic market landscape, with recent mergers and acquisitions shaping its strategic outlook. In light of Truist Securities' updated price target and hold rating, it's beneficial to consider additional insights from InvestingPro. Notably, management's aggressive share buyback strategy and Everi's high shareholder yield are key factors that could influence investor sentiment. Furthermore, the company's impressive gross profit margin, which stood at 80.22% for the last twelve months as of Q1 2024, underscores its financial health in terms of revenue efficiency.
Investors should also be aware of the stock's volatility, as indicated by the 12.77% return over the last month, juxtaposed with a 39.12% decline over the past year. This fluctuation in share price presents both opportunities and risks. Additionally, with a market capitalization of $757.52 million and a more attractive forward-looking P/E ratio of 10.75, the valuation suggests that the company might have a strong free cash flow yield going forward, which is a positive sign for potential investors. Analysts predict profitability for the year, a sentiment backed by the company's performance over the last twelve months.
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