Everi Enthusiasm Extends as Analyst Forecasts More Upside for Shares

Posted on: June 14, 2021, 09:44h. 

Last updated on: July 19, 2021, 03:07h.

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

Everi Holdings (NYSE:EVRI) stock can continue building on 2021 bullishness, as casino operator budgets recover from depressed levels forced by the coronavirus pandemic.

Everi stock
A bank of slot machines at the Eldorado Resort in Reno. Increased demand for gaming devices later this year could lift Everi stock. (Image: David Calvert/Nevada Independent)

In a note to clients, Stifel analyst Jeffery Stantial reiterates a “buy” rating on the gaming machine maker and casino fintech provider. He boosts his price target to $25 from $23, implying upside of almost 13 percent from current levels. Under any circumstances, that’s a positive assessment. But it’s even more so when considering shares of Everi are higher by 61.33 percent year-to-date.

Looking forward, management sees ample white space to continue to take share with commercial operators, while still growing their footprint with tribal operators,” writes Stantial. “In particular, EVRI recently received regulatory approval to supply WAP games to commercial operators in New Jersey/Nevada.”

Everi is potentially appealing to investors because it’s a dual catalyst story. Its gaming device business is levered to the ongoing recovery in visitation levels at the Las Vegas Strip and regional and tribal casinos, while its fintech operation is tethered to the still-nascent move by operators to cashless gaming.

By some estimates, 54 percent of the company’s earnings before interest, taxes, depreciation and amortization (EBITDA) is derived from gaming devices, while 46 percent is attributable to fintech.

Everi Stock Soaring as Spending Remains Restrained

While data suggests gamblers are flocking back to casinos on the Strip and elsewhere, operators are keeping a lid on slot machine spending. That’s because they want to see how durable the visitation trends prove as more entertainment options in other industries come back online.

Stifel’s Stantial notes it’s possible casino companies increase spending later this year as they get more clarity on traffic trends and as new products come to market. The analyst says it’s possible that Everi benefits in a significant fashion from those scenarios.

“We could see some pent-up demand during Q4 as operators 1) get a look at the latest product at this year’s G2E, and 2) deploy some portion of excess capital before year-end. We would expect EVRI to disproportionately benefit from any pent-up demand, as our checks suggest EVRI is well-poised for ship share gains into the recovery,” said Stantial.

Fantastic Fintech Setup

While Everi’s fintech story is an increasingly prominent part of the equity thesis, it’s also still in its early innings.

“On the FinTech side, we believe financial access transaction volumes continue to outpace our, and management’s, initial expectations as robust consumer demand trends translate to higher cash needs on the floor,” said Stantial.

The analyst highlighted Caesars Palace on the Strip testing Everi’s Jackpot Xpress, a tax data reporting system, as a big win for Everi.

“We see the announcement as a large vote of confidence for the product, and EVRI’s broadening offering set, given CZR management’s unwavering focus on margins and capital efficiency,” according to Stantial.