AGS Texas Alternative not Mirrored in Share Value, Says Analyst

AGS (NYSE:AGS) inventory might provide Texas-sized alternative that’s not presently mirrored within the share worth. That’s following final week’s Supreme Court docket ruling that paves the way in which for the Ysleta del Sur Pueblo tribe to supply bingo video games close to its El Paso reservation.

AGS promoting a sales space at a Native American gaming commerce present. An analyst sees alternative within the inventory following a Supreme Court docket Texas bingo ruling. (Picture: Twitter)
That’s the sentiment of Roth Capital analyst Edward Engel, who charges AGS a “purchase” with a 12-month worth goal of $11, or greater than double the place the inventory presently trades.
After the Supreme Court docket not too long ago dominated in favor of the Tigua Indians working Class II gaming in Texas, we don’t imagine this overhang elimination or development alternative has been mirrored in AGS shares,” writes Engel in a notice to purchasers. “Previous to the ruling, traders have been discounting ~$10-12M of high-margin revenues for AGS, the place an unfavorable ruling would have wiped these out. Somewhat, the favorable ruling now presents a development alternative for AGS, as two tribal casinos in TX usually tend to broaden on line casino flooring.”
Ysleta del Sur Pueblo, together with the Alabama-Coushatta — one other Texas tribe — could possibly be beneficiaries of the Supreme Court docket ruling. So might AGS, as a result of gaming enlargement in Texas might enhance demand among the many firm’s tribal purchasers there.
Texas Gaming Growth Attainable
Because the second-largest US state, Texas is a coveted vacation spot for industrial and tribal on line casino operators. However the state has lengthy been reluctant to embrace on line casino gaming.

Tribal gaming entities in Oklahoma and industrial operators in Louisiana have additionally opposed casinos in Texas, and are believed to foyer state politicians there to that impact. With that, it stays to be seen if the Supreme Court docket ruling will result in tribal casinos within the state. However it’s clear any further gaming there may gain advantage AGS.

“The Tigua Indians function a Class II on line casino in El Paso, with an area inhabitants of ~700k. The Alabama-Coushatta tribe operates a Class II on line casino ~90 miles from Houston, making it the closest on line casino to Houston, vs. the favored Lake Charles, LA on line casino ~140 miles away,” provides Engel. “Previous to the ruling, each tribes had been reluctant to pursue property expansions, regardless of evident capability constraints in each markets. Following the ruling, we’d anticipate each tribes to announce expansions in each gaming and non-gaming footprints.”
Most of AGS prospects are in Florida, Oklahoma, and Texas, and the corporate applauded the Supreme Court docket resolution.
For AGS, Low-cost Inventory, Massive Alternative
AGS could possibly be on the cusp of one thing significant in Texas, and a case could be made that chance isn’t absolutely appreciated by the funding group.
“The Tigua and Alabama-Coushatta tribes function simply ~1,500 and ~800 Class II units, respectively, the place AGS provides EGMs to each properties,” notes Engel. “Alongside any property expansions, we’d anticipate AGS to get its justifiable share of each expanded gaming flooring. This suggests a significant turnaround vs bearish expectations that AGS would lose its footprint within the state.”
AGS is discounted relative to friends, and with its inventory slumping, it might deploy capital from an previous buyback plan to repurchase a few of its share.
“Previous to the ruling, we believed AGS’s deep low cost vs. friends was partially attributable to traders discounting Texas operations, which represented ~5% of revenues. Latest channel checks with gaming suppliers and operators point out no softening in gaming consumption, regardless of traders pricing in recessionary outcomes,” concludes Engel.
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