Like so many other gambling companies, PlayAGS posted a loss in the fourth quarter, thanks to the effect of the coronavirus pandemic. Revenue also tumbled. Both figures missed Wall Street estimates.
But the future seems bright.
“The Covid-19 pandemic slowed down the pace of life,” CEO David Lopez said in a statement. “As a company, we used this time to refine our strategy and improve our operating efficiency, with a keen focus on three key areas: people, product, and processes. As a result, I believe we are better positioned today to achieve success across all three of our business segments than at any other point in our company’s history.”
PlayAGS, which makes electronic slot and bingo games, recorded a net loss of $17.2 million, or 49¢ per share, for the three months ended December 31, compared to an income of $1.4 million, or 4¢ per share in 2019. Adjusted earnings before interest, taxes, depreciation and amortization, declined 43 percent to $21.3 million. Quarterly revenue tumbled 40 percent to $46.6 million, missing the $47.4 million average forecast, according to CDC Gaming Reports.
“Not only were we able to nimbly streamline our business to preserve liquidity at the onset of Covid-19,” Chief Financial Officer Kimo Akiona said, “but we opportunistically shored up our balance sheet in May and successfully ramped operations as our casino-operator partners gradually brought their businesses back on line.”
Though Jefferies downgraded the stock to “hold” from “buy,” analyst David Katz raised his price target from $6 to $7.
“The market is mispricing the recovery opportunity here and the lack of trading liquidity is likely preventing a quicker correction,” Union Gaming analyst John DeCree wrote. “This creates an interesting later-innings recovery play and we recommend building a position in the shares over the next two or three quarters.”
PlayAGS sent historical horse racing electronic gaming machines to Virginia where gambling expansion could help the business, said Roth Capital Partners analyst David Bain.
“In our view, the broader regional casino recovery, led by the U.S. vaccine roll-out, pent-up demand, and additional stimulus measures, is likely to push casino (capital expenditure) for gaming product back to normalcy ahead of consensus/our estimates,” Bain said.
For the full year ended December 31, PlayAGS had a net loss of $85.3 million, or $2.40 per share. Twelve-month revenue dropped 38.6 percent to $129.2 million from $210.5 million.