Everi Stock ‘Dislocation’ Could Bring Investor Opportunity, Says Analyst

Posted on: March 3, 2020, 03:40h. 

Last updated on: March 3, 2020, 04:06h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Everi Holdings Inc. (NYSE:EVRI) is following other gaming stocks lower, having shed more than 24 percent over the past week. But at least one analyst remains bullish on the gaming technology solutions provider.

Slots maker Everi has been punished, but one analyst likes the stock. (Image: Yahoo Finance)

The Las Vegas-based company reported fourth-quarter results on Monday, saying its loss narrowed to five cents a share on revenue of $1452. million, compared with a loss six cents a share on sales of $119.5 million a year earlier. That wasn’t enough to assuage skittish investors, as Everi stock plunged 3.80 percent Tuesday on more than triple the average daily volume, joining a large group of gaming stocks on the downside.

In brighter news, the company said it expects to generate $95 million to $100 million in free cash flow this year, an impressive forecast for a company that ended Tuesday with a market capitalization of $837 million.

After digesting another round of solid EVRI earnings and a modestly better than expected initial 2020 guide, we encourage investors to take advantage of the current dislocation in the trading multiple, largely a result of the coronavirus hysteria in our view, to gradually add to positions in the name for the long term,” said Stifel analyst Brad Boyer in a note obtained by Casino.org.

Everi CEO Michael Rumbolz said on a conference call with analysts yesterday that the novel coronavirus outbreak isn’t disrupting the company’s supply chains, noting the company “has not experienced any discernible impact to-date.”

Evaluating Everi

Everi provides software and payment systems to operators as well as gaming products, such as classic mechanical reel, video reel, and progressive games. Because of some recent deal-making, the company is also growing its financial technology (fintech) footprint.

“The FinTech segment also remains on solid footing, achieving 4Q19 y/y EBITDA growth of 11%,” said Boyer. “FinTech continues to benefit from steady cash-to-floor metrics, continued lift from recent M&A activity, and a natural kiosk refresh cycle. We continue to believe EVRI has a significant competitive moat within the FinTech segment, and contend investors’ continue to underappreciate the segment’s superior growth trajectory and corresponding resiliency.”

By the company’s own estimation, FinTech provides a significant avenue for future growth.

“FinTech equipment sales revenues more than doubled (in the fourth quarter),” said Rumbolz. “This was primarily driven by the demand for our fully integrated self-service kiosks. There was also a $1.9 million contribution from sales of self-service player loyalty kiosks, which is up from the $1.2 million of revenue in the third quarter.”

Sticking With The Stock

After more than doubling last year, Everi stock is now in the throes of a bear market, down 30.32 percent this year and 37 percent from its 52-week high. But Boyer still likes the name.

“In the end, although we cannot declare with certainty EVRI shares have bottomed. We believe long-term investors would be foolish not to begin taking advantage of the discounted valuation to add to positions in the name,” said the analyst. “Furthermore, while greater fallout from the coronavirus has the potential to inflict additional damage on the shares, we believe management’s newly initiated share repurchase authorization should help to mitigate downside risk.”

Boyer lowered his price target on Everi to $14 from $16. But the nice forecast still implies upside of more than 49 percent from where the stock closed today.