Posted on: October 16, 2023, 04:26h.
Last updated on: October 16, 2023, 04:26h.
Following the recent Global Gaming Expo (G23) held in Las Vegas, some analysts are expressing optimism for various gaming equities, particularly in the slot machine sector.
In a recent report, Stifel analyst Jeffrey Stantial suggests that some slot machine manufacturers and casino operators are trading at attractive valuations, leading to increased merger and acquisition speculation in the industry. Stantial highlights International Game Technology (NYSE: IGT) and PlayAGS (NYSE: AGS) as his top slot machine stock ideas for the rest of the year.
According to Stantial, most slot managers he spoke with indicated stable purchasing intentions, with limited signs of decreasing demand. Stantial’s estimates for 2024 foresee a modest pullback in the replacement cycle, which aligns with industry sentiment.
The Global Gaming Expo (G2E) is a crucial event for slot machine manufacturers, as it is often the platform to showcase new games to casino slot managers.
Strong Performance from AGS and IGT
Based on conversations with slot buyers at G2E, Stantial reports that customers were highly impressed with the new offerings from industry leaders such as Aristocrat Leisure and Light & Wonder. These companies, along with IGT, are the three largest slot suppliers in North America.
PlayAGS received accolades from slot managers as one of the most improved firms in the category. Gaming device manufacturers are benefiting from consumers’ continued dedication to casino visits, providing operators with resilience. Analysts also note that supply chain pressures in the industry are easing.
Given these factors, Stantial believes that slot machine stocks like PlayAGS, with room for growth, and IGT, with stock-specific catalysts, are well-positioned for potential gains.
“As forecasting market share trends remains challenging without a clear leader, we prefer smaller suppliers with significant growth potential (AGS) or suppliers with unique catalysts (IGT),” added Stantial.
Potential for M&A Activity
Consolidation in the slot machine sector may increase in the coming months. One notable company to watch is IGT, which announced in June that it is exploring strategic options for its global gaming and PlayDigital units.
Additionally, smaller rival Ainsworth recently expressed openness to acquisitions and being acquired. There is also speculation about potential deals involving iGaming and online sportsbook operators looking to bring tech stacks in-house. Lastly, rumors about a potential MGM/Entain acquisition were also discussed at the conference,” concluded Stantial.