Everi Holdings Inc (NYSE:EVRI) stock has been on fire for more than a year now- so is it time to bet on this gaming stock? If you want a way to play the Vegas casino gaming industry, and would rather invest in the companies selling to the casinos and not in the casinos themselves, then one way to do this is by investing in Everi Holdings Inc (NYSE:EVRI). This Las Vegas-based company operates through two different subsidiaries: one for gaming equipment and gaming content, and another for gaming payment solutions.
Shares of EVRI are currently trading at $4.74, giving the company a total stock market capitalization of $324.40 million. Over the most recent 52-week period, shares have traded as low as $1.13 and as high as $4.91. Institutional owners account for 69% of all stock ownership.
Of late, Everi Holdings Inc (NYSE:EVRI) has been riding a huge momentum wave upward. Over the past 30 days, shares of EVRI have skyrocketed 44.51%. On a YTD basis, shares are up 118.43%.
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So what’s driving this big move?
One answer is that company is making it much easier for investors to value it. The company was formerly known as Global Cash Access Holdings until it rebranded as Everi in August 2015. The company now focuses on two distinct business units. That makes it much easier to do a “sum of the parts” analysis and figure out the right value for the company.
There’s one business unit (Everi Games Holding Inc.) that primarily focuses on leasing gaming equipment, including both video and mechanized gaming. The other business unit is Everi Payments Inc., which focuses primarily on getting customers access to cash at gaming facilities. This also includes technology solutions integrating gaming payment solutions, such as for compliance purposes.
If you look at the company’s latest 4Q 2016 and FY 2016 numbers, both released on March 14, you can get a good sense of why it’s so important to make the distinction between these two business units. In 4Q 2016, the company reported revenue of $217.5 million, compared to $204.4 million in the year-earlier period. That sounds impressive until you also look and see that the company posted an operating loss of $140.0 million and a net loss of $217.3 million.
So how is it possible that a Vegas gaming company could be losing so much money, especially when the top-line revenue numbers look so impressive? If you read the footnotes to the financials, the reason is clear – the company took a massive $146.3 million goodwill impairment charge for previously having overvalued its games unit. (The most recent acquisition for the company was a $1.2 billion purchase of Texas-based slot maker Multimedia Games in December 2014.) So it looks like the company is basically taking a breather and revaluing its gaming assets, all as a way to pave the way for future growth.
And that growth story is what really has the attention of analysts. Over the past 5 years, EVRI posted EPS growth of 8.84%. Not too bad, right? Well, analysts now expect EVRI to boost that growth rate to 20% annually.
That being said, the mean price target for EVRI is still just $5.00. That’s not much of a premium from the current price of $4.74. Zacks Investment Research came out with an upgrade on March 17, moving from “Hold” to “Buy.” So that’s encouraging. But even Zacks only set a price target of $4.50 for the stock.
The one area to keep an eye on is something EVRI calls “Intelligence.” In addition to Games and Payments, the company is now building out its Intelligence operations. What the company means by this is better insights into how people use their gaming machines, and how to use loyalty programs to maximize their spend. It’s all about analyzing casino floor activity and patron behaviors, and putting it all into a complex mathematical model to make sure casinos are making as much money as possible.
So, as with anything having to do with Vegas, make sure that you know what’s really going on with this company before investing. On one hand, you have some ugly bottom line financial numbers and very conservative price targets for EVRI. On the other hand, you have amazing recent momentum behind EVRI in the stock market and predictions that the company is going to more than double its annual growth rate over the next five years. So are you ready to make a bet on the future of this company? For more news on Everi Holdings (NYSE:EVRI) and other fast-moving penny stocks, please subscribe to OracleDispatch.com below.