Bally’s Bounces as Jefferies Calls it ‘Transformative’ Casino Stock

Posted on: April 21, 2021, 01:38h. 

Last updated on: April 21, 2021, 02:24h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Bally’s (NYSE:BALY) is rallying Wednesday, chipping away at a 20 percent slide over the past month on more upbeat analyst commentary.

Shares of the casino operator jumped 4.20 percent today, good for one of the best intraday performances among gaming equities. That’s after Jefferies analyst David Katz initiated coverage of the stock with a “buy” rating and a $66 price target. That implies upside of 20 percent from the April 20 close.

Our initiation with a Buy rating is based on the formative stages of the business and the considerable value yet to be realized,” said the analyst.

“We note that BALY is compiling a transformative portfolio of assets that should position the company for meaningful share in both land-based and digital markets, which warrants a higher value than the current 10X earnings before interest, taxes, depreciation and amortization (EBITDA).”

Katz’s call on Bally’s arrives as Wall Street is increasingly bullish on the stock. But his $66 price estimate is well below the consensus of $82.50. The all-time high for the gaming equity is $75.92, which was reached last month.

Bally’s in Formative Stages

Long one of the most acquisitive companies in the gaming industry, Bally’s in the process of wrapping up a variety of deals spanning daily fantasy sports (DFS), land-based casinos, and online gaming.

Last week, the operator put the finishing touches on its $2.7 billion buy of UK-based Gamesys, while announcing it’s buying Tropicana Las Vegas. This is its largest purchase to date. Those transactions arrive after a failed attempt to acquire World Poker (WPT) and as the operator digests DFS company Monkey Knife Fight (MKF), free-to-play games provider Sportcaller, and several brick-and-mortar casinos.

“The acquisitions/merger of casinos in nine states, DFS, sports betting and iGaming operators, and the acquisition of media assets are at formative stages,” said Katz.

Accounting for still-to-be-completed deals, Bally’s will operate 16 gaming properties in 11 states when pending purchases close.

For Bally’s Stock, Future Is Online

While acquiring traditional casinos expands its geographic footprint, Bally’s future is largely online, as is the case with so many of its rivals. That places a premium on the company’s ability to successfully integrate the Gamesys acquisition and launch of mobile sports betting app later this year.

“What remains for BALY is execution for the casinos, Gamesys closing, and US digital go-lives. We believe that as the story progresses, the shares should capture fuller value,” said Katz.

Amid swelling forecasts for the future of US iGaming, Bally’s stock is still inexpensive. Jefferies’ Katz sees “$14 incremental risk/time-adjusted value” attributable to the Gamesys acquisition, and $24 in potential future value by way of the Bally’s rising digital gaming business.