On Thursday, Stifel, a financial services firm, adjusted its outlook on Everi Holdings (NYSE:EVRI), a casino gaming company. The firm's analyst lowered the price target on Everi Holdings to $11 from $12 while still maintaining a Buy rating on the stock.
The revision comes in the wake of the company's first-quarter performance, which showed a 5% miss on adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and a downward revision of its full-year 2024 guidance. The company cited specific challenges in its Games segment and rising labor costs that negatively impacted its FinTech margins.
Despite the lowered guidance, Everi's shares reportedly traded in line with its peers on Thursday. This performance was attributed to the market's already cautious stance, as the stock has experienced a significant decline since the announcement of its merger, dropping 33% since the news and 47% over the past twelve months.
The analyst pointed out that investor expectations for a second-half 2024 turnaround in the Games segment appear muted. There is also a belief that the market is not fully appreciating the progress in other areas of Everi's business, particularly following its merger with IGT, a gaming company.
Stifel's analysis indicates that the market's focus might be too heavily placed on the standalone Everi Games performance, potentially overlooking the momentum in other divisions of the newly merged entity. The firm anticipates credible top-line synergies from the merger. Despite the immediate challenges, Stifel's outlook remains positive, reflected in the continuation of a Buy rating for Everi Holdings.
The price target adjustment to $11 reflects a modest decrease from the previous target. This new target is based on a sum-of-the-parts (SOTP) methodology, which implies a 5.2 times multiple on the firm's projected 2025 adjusted EBITDA for Everi Holdings post-merger.
Additionally, Stifel has revised its 2024 and 2025 standalone adjusted EBITDA estimates for Everi downwards by 3% and 4%, respectively. This revision primarily accounts for the increased operating expenses in the company's FinTech division. Stifel also mentioned plans to publish full pro-forma models closer to the deal's closing to provide a more detailed financial outlook.
InvestingPro Insights
As Everi Holdings (NYSE:EVRI) navigates through its post-merger challenges and market adjustments, real-time data and insights from InvestingPro offer a deeper understanding of the company's financial health and outlook. Everi's management has demonstrated confidence through an aggressive share buyback strategy, as noted in one of the InvestingPro Tips, underscoring a commitment to enhancing shareholder value. Additionally, the company's impressive gross profit margins stand out, with the last twelve months as of Q1 2024 showing a robust 80.22%, indicating a strong ability to control costs relative to its revenue.
InvestingPro Data also reveals that Everi's valuation implies a strong free cash flow yield, which could signal an attractive investment opportunity for those looking for value stocks. Despite recent price declines, with the stock trading near its 52-week low and experiencing a significant drop over the last six months, analysts predict profitability for the year, a sentiment that aligns with Stifel's positive outlook and Buy rating. It's worth noting that Everi does not pay a dividend, which may influence investment decisions for income-focused investors.
To gain further insights and access more detailed analytics, including additional InvestingPro Tips for Everi Holdings, interested readers can explore the comprehensive resources available at InvestingPro. For those considering an InvestingPro subscription, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 11 more tips listed in InvestingPro, investors can equip themselves with a well-rounded view of Everi's potential in the dynamic gaming industry.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.