On Monday, Raymond James adjusted its rating on Everi Holdings (NYSE:EVRI) stock, moving from a 'Strong Buy' to a 'Market Perform' status. The revision follows the recent announcement that private equity firm Apollo will acquire both the gaming division of International Game Technology (NYSE:IGT) and Everi Holdings for an approximate total of $6.3 billion.
The deal sets the Everi takeout price at $14.25 per share, which is a 56% premium over the price at Thursday's market close. Analysts at Raymond James noted that this price aligns with the implied issuance price for the IGT deal. They evaluated the transaction at approximately 6 times Everi's projected 2024 EBITDA and about 12 times its expected free cash flow (FCF), deeming the valuation to be fair.
The equity research firm also expressed that they do not anticipate a higher competing offer, citing recent difficulties within the gaming business sector. With the acquisition price only slightly above their previous target of $14 and Everi's shares currently trading at roughly an 11% discount to the takeover price, Raymond James has decided to adopt a neutral stance on the stock.
Everi Holdings, which specializes in electronic gaming machines and financial technology solutions for the gaming industry, has seen its shares react to the acquisition news, trading closer to the proposed buyout price. The transaction is expected to close subject to customary closing conditions, including regulatory approvals.
In other recent news, Everi Holdings has announced plans to merge with IGT's Global Gaming and Play Digital businesses, with the merger expected to be finalized between late 2024 and early 2025. This move aims to enhance product offerings and expand market presence.
Truist Securities has adjusted its outlook on Everi Holdings, reducing the price target to $10 from the previous $11, while maintaining a Hold rating on the stock. This revision reflects the firm's analysis of recent mergers and acquisitions within the gaming sub-sector.
The firm's analyst cites the completion of anticipated M&A activities in 2024 as a factor influencing the new price target. However, the analyst also noted that Everi may face earnings risks in the short term due to M&A-related disruptions and slower-than-expected product rollouts. Despite a decline in the Games segment, Everi's Fintech cash access services have seen growth.
Everi's first-quarter results showed a dip in its Games segment, but its Fintech cash access services grew. 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. These are among the recent developments concerning Everi Holdings.
InvestingPro Insights
Everi Holdings (NYSE:EVRI) has been at the center of investor attention following the acquisition announcement by Apollo. To provide further context, InvestingPro data highlights a robust gross profit margin of 80.22% in the last twelve months as of Q1 2024, which underscores the company's efficiency in managing its cost of goods sold relative to its revenue. Additionally, the stock's impressive 52.98% return over the last week seems to reflect the market's positive reaction to the acquisition news.
InvestingPro Tips also reveal that management's aggressive share buyback strategy could be a signal of confidence in the company's future prospects. Moreover, analysts predict that Everi will be profitable this year, a sentiment that is supported by the company's performance over the last twelve months. While the stock trades at a high Price / Book multiple of 4.66, indicating that it may be priced richly compared to its book value, the recent returns and profitability forecasts could be a draw for investors.
For readers interested in an in-depth analysis, there are an additional 11 InvestingPro Tips available for Everi Holdings at https://www.investing.com/pro/EVRI. To access these insights and more, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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