The gambling industry's exceptional performance in the past year, its transition toward digital platforms, and the growing preference for casino gaming as a form of entertainment have placed it in a favorable position to achieve noteworthy progress in the foreseeable future.
With this in mind, fundamentally strong gambling stocks Boyd Gaming Corporation (BYD), International Game Technology PLC (IGT), Accel Entertainment, Inc. (ACEL), Inspired Entertainment, Inc. (INSE), and PlayAGS, Inc. (AGS) could make worthwhile investments. Let’s explore why.
Last year was momentous for the gambling industry, as it witnessed unparalleled profits and a shift toward digital platforms. The American Gaming Association's (AGA) Commercial Gaming Revenue Tracker reported that commercial gaming revenue surged to a staggering $60.40 billion, marking a historic milestone for the industry.
The industry reached an unprecedented milestone with a quarterly commercial gaming revenue peak of nearly $15.90 billion in the fourth quarter of 2022. Sports betting and iGaming reached their all-time high during the same period, while traditional gaming experienced a modest 1.7% annual growth.
Spectrum forecasts an increase in efforts to legalize iGaming, driven by the recognition of its profitability potential among both traditional casinos and independent providers, as well as its growing popularity among state legislators.
Bill Miller, AGA President and CEO, said, “Simply put, American adults are choosing casino gaming for entertainment in record numbers, benefitting communities, and taking market share from the predatory, illegal marketplace.”
Increased internet usage, cultural and legal acceptance, widespread access to online gambling, celebrity endorsements, and corporate sponsorships are further boosting the industry’s growth. The global online gambling market is anticipated to grow at an 11.7% CAGR reaching $153.57 billion by 2030.
Moreover, investors’ interest in gambling stocks is evident from the S&P 500 Casinos & Gaming Index’s 39.2% returns over the past six months.
So now let us examine what makes the featured stocks worth the gamble.
Boyd Gaming Corporation (BYD)
BYD is a multi-jurisdictional gaming company. It operates across multiple states, including Indiana, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. The company operates through three segments, Las Vegas Locals; Downtown Las Vegas; and Midwest & South. It also owns a travel agency.
On February 14, BYD raised its quarterly dividend from $0.15 to $0.16 per share, payable on April 15, 2023, to shareholders of record on March 15, 2023. While BYD’s four-year average dividend yield is 0.53%, its current annual dividend of $0.61 translates to a 1.01% yield. Over the past three years, BYD’s dividend payouts have grown at a 42.7% CAGR.
On November 1, 2022, the company announced the successful acquisition of Pala Interactive LLC for $170 million. The acquisition is expected to enhance BYD's online casino gaming opportunities by providing advanced technology, products, and expertise. It would also expand the company's customer base and complement its existing land-based operations.
For the fourth quarter that ended December 31, 2022, BYD’s total revenues increased 4.9% year-over-year to $922.92 million, while its adjusted EBITDA rose 3.8% year-over-year to $333.27 million. The company’s adjusted earnings and adjusted EPS grew 17.8% and 27.4% from the prior year’s quarter to $181.76 million and $1.72, respectively.
Street expects BYD’s revenue to increase 2.1% year-over-year to $878.61 million in the fiscal first quarter ending March 2023. Its EPS for the ongoing quarter is expected to increase 5.3% year-over-year to $1.47. The company surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 29.8% over the past six months to close the last trading session at $60.92.
BYD’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Value. It is ranked #5 out of 30 stocks in the Entertainment - Casinos/Gambling industry.
Beyond what is stated above, we’ve also rated BYD for Growth, Stability, Momentum, and Sentiment. Get all BYD ratings here.
International Game Technology PLC (IGT)
IGT, headquartered in London, the United Kingdom, provides a suite of gaming technology products and services across three segments, Global Lottery; Global Gaming; and PlayDigital. The company offers lottery transaction processing systems, instant ticket games, gaming cabinets, sports betting technology, digital gaming products, and more.
On March 22, the company joined forces with Gift & Go, a B2B gifting tech platform. The collaboration is expected to enhance IGT's system solutions offering by providing an additional feature that would increase the attractiveness of its ADVANTAGE™ system to potential and existing customers. This could bode well for the company.
Also, on March 20, IGT announced a multi-year deal with Graton Resort & Casino in Rohnert Park, California, to enable cashless gaming through its Resort Wallet™ and IGTPay™ solutions. As cashless commerce is gaining popularity, the company could strategically benefit by providing Graton with advanced cashless gaming technology.
During the fiscal fourth quarter that ended December 31, 2022, IGT’s total revenue increased 4.1% year-over-year to $1.09 billion. Its operating income rose 23.7% year-over-year to $230 million. Also, the company’s total adjusted EBITDA rose 8.3% from the year-ago value to $419 million, while adjusted EPS increased 207.7% year-over-year to $0.40.
Analysts expect IGT’s revenue to increase 3.1% year-over-year to $4.28 billion for the fiscal year ending December 2024. Likewise, the company’s EPS for the same year is expected to rise 3.8% from the prior year to $2.07. IGT surpassed the consensus revenue and EPS estimates in three of four railing quarters.
The stock has gained 60.3% over the past six months to close the last trading session at $25.12.
IGT’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
IGT has an A grade for Sentiment and a B for Value and Quality. It has topped the 30-stock Entertainment - Casinos/Gambling industry.
In addition to the POWR Ratings I’ve just highlighted, you can see IGT ratings for Stability, Growth, and Momentum here.
Accel Entertainment, Inc. (ACEL)
ACEL is a distributed gaming operator that installs, maintains, and operates gaming terminals, redemption devices, and other amusement devices in non-casino locations. The company also provides gaming solutions to location partners and operates stand-alone ATMs and other entertainment equipment like pool tables and jukeboxes.
During the fiscal 2022 fourth quarter, ACEL repurchased $17 million worth of Accel Class A-1 common stock, with a total of $79 million for the full year 2022. The share repurchase program demonstrates the company's financial strength and commitment to enhancing shareholder value.
ACEL’s total net revenue increased 44.6% year-over-year to $278.07 million in the fiscal fourth quarter that ended December 31, 2022. Its operating income rose 47.1% year-over-year to $25.09 million. Furthermore, the company’s adjusted EBITDA grew 30.3% from the year-ago value to $43.31 million, and adjusted net income increased 20.4% year-over-year to $20.82 million.
ACEL’s EPS and revenue are expected to increase 8.1% and 36.9% year-over-year to $0.20 and $269.54 million, respectively, in the fiscal first quarter ending March 2023. Shares of ACEL have gained 14.8% in the past six months to close the last trading session at $8.93.
It’s no surprise that ACEL has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has a B grade for Value and Quality. ACEL is ranked #3 out of 30 stocks within the same industry.
To see the other ratings of ACEL for Stability, Growth, Momentum, and Sentiment, click here.
Inspired Entertainment, Inc. (INSE)
INSE provides a range of gaming products and services, including content, technology, hardware, and solutions for regulated gaming, betting, lottery, social, and leisure operators worldwide. The company operates across four segments, Gaming; Virtual Sports; Interactive; and Leisure, serving retail and mobile channels.
On March 24, INSE partnered with Aristocrat Gaming™ to offer a new virtual sports experience for NFL fans. The collaboration should help INSE to expand its reach to a larger audience and potentially generate additional revenue streams while enhancing the company's brand reputation.
Furthermore, on December 12, 2022, the company announced an exclusive long-term contract with Paddy Power, a bookmaking enterprise, to provide Paddy with fully integrated managed services for its entire United Kingdom estate of roughly 1,400 terminals.
The partnership confers several advantages to INSE, including an amplified market presence in the United Kingdom's high-end areas and a curtailment of operational expenses.
INSE’s total revenues increased 17.3% year-over-year to $78.60 million during the fiscal fourth quarter that ended December 31, 2022. Its adjusted EBITDA rose 16.4% from the prior year’s period to $25.60 million. Moreover, the company’s net income and EPS stood at $3.10 million and $0.11, compared to a net loss and loss per share of $1.20 million and $0.05 in the previous year’s quarter, respectively.
INSE’s EPS is expected to increase 25.4% year-over-year to $0.97 for the fiscal year ending December 2023. Its revenue for the current year is expected to increase 10.4% year-over-year to $315.09 million. Also, the company has topped the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 38.3% to close the last trading session at $13.08.
INSE’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
In addition, it has a B grade for Value and Quality. It is ranked #4 out of 30 stocks within the same industry.
Click here to see the additional ratings of INSE for Growth, Stability, Momentum, and Sentiment.
PlayAGS, Inc. (AGS)
AGS designs and provides gaming products and services to the casino industry. Its segments include Electronic Gaming Machines; Table Products; and Interactive Games. The company also provides a platform for content aggregation and social casino games through its mobile app, Lucky Play Casino.
On February 6, AGS announced an online game content collaboration with DraftKings, Inc. (DKNG). As per the agreement, AGS would furnish DKNG Casino with more than 20 of its exclusive slot games to bolster DKNG's i-casino operations in North America.
The partnership is expected to bestow substantial advantages to AGS by enhancing its visibility in the online gaming market and fortifying its status as a purveyor of top-tier gaming content.
Additionally, on January 24, AGS unveiled a strategic collaboration with Caesars Sportsbook & Casino to provide them with an assortment of their premium online gaming content. AGS remains steadfast in its objective to extend its market reach by partnering with industry-leading brands in the gaming sector.
In the fourth quarter that ended December 31, 2022, AGS’ Electronic Gaming Machines (EGM) revenues increased 16.8% year-over-year to $75.34 million, while total revenues increased 16.4% year-over-year to $81.74 million. Its income from operations rose 627.3% from the year-ago value to $13.45 million. Also, the company’s total adjusted EBITDA grew 15.6% year-over-year to $37.28 million.
Street expects AGS’ revenue and EPS for the fiscal year ending December 2024 to increase 3.3% and 274.7% year-over-year to $336.57 million and $0.22, respectively. Moreover, the company surpassed the consensus revenue estimates in all four trailing quarters.
The stock has gained 29.7% over the past six months, closing the last trading session at $6.99.
AGS’ robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our POWR Ratings system.
The stock has an A grade for Sentiment and a B for Growth and Value. It is ranked #2 out of 30 stocks within the same industry.
Access additional AGS grades for Stability, Momentum, and Quality here.
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BYD shares were trading at $61.06 per share on Tuesday afternoon, up $0.14 (+0.23%). Year-to-date, BYD has gained 12.28%, versus a 3.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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