Recent analyst notes reveal critical insights into the gambling industry, focusing on Inspired Entertainment's momentum, investor interests in online sports betting, and updates on Mohegan Tribal Gaming Authority and Vici Properties. These insights underscore the evolving landscape of the sector and the factors influencing investor sentiment.
Analyst Josh Nichols from B Riley Securities shared insights on April 6 regarding Inspired Entertainment. With a price target of $13, Nichols believes the company's favorable business momentum has not been accurately reflected in its current share price of around $7, which translates to a low valuation of 4.3 times the expected 2026 EBITDA.
Notably, management has guided a year-over-year EBITDA increase of at least 20% for the first quarter, attributing this growth to an improved segment mix that enhances margins. Additionally, the data from the interactive market indicates a sustained momentum throughout the quarter, aligning with the record activity noted during the fourth quarter call. Furthermore, the retail side of the business is exhibiting robust strength, which has largely gone unnoticed by investors who are more focused on digital transformation.
On April 5, Jefferies' David Katz examined what is currently capturing the attention of investors in the gaming sector. He noted a pronounced interest in online sports betting and digital platforms, driven by various factors including ongoing discussions surrounding Kalshi, the legalization processes for online sports betting (OSB) and iGaming across several states, and recent positive metrics related to OSB.
Katz pointed out that the complexities surrounding sports prediction markets are distinct from those of non-sport markets, suggesting that challenges in this area may persist. He highlighted that companies like DraftKings and Sportradar are struggling, with declines of 35% and 30% year-to-date, respectively, while Rush Street has shown a significant positive performance, up 12%. Despite the current challenges, Katz maintains a bullish outlook for these companies, suggesting that their estimates are positioned for upward movement.
On April 2, Fitch Ratings placed the ‘B’ Long-Term Issuer Default Ratings (IDRs) of the Mohegan Tribal Gaming Authority and MS Digital Entertainment Holdings on Rating Watch Positive. This decision followed the announcement of the sale of the Connecticut Sun, the Tribe’s WNBA franchise.
The Rating Watch reflects expectations of reduced leverage from the proceeds of this sale, with most funds likely directed toward debt reduction, potentially resulting in positive rating actions. The agency also acknowledged the strong market position of the Mohegan Sun casino, its growing digital results, and positive free cash flow generation. However, it also pointed to concerns such as geographic concentration, the possible effects of new casino openings in New York City, and limited financial flexibility.
Barry Jonas from Truist Securities provided insights on March 30 regarding Vici Properties' acquisition of two gaming assets in Alberta for $144 million, part of Pure Casino Entertainment's initiative to go private at an 8.0% cap rate. This deal is expected to generate approximately $12 million in annual rent and is anticipated to be modestly accretive to adjusted funds from operations, enhancing Vici’s partnership with PURE.
Reflecting on these developments, Jonas adjusted his estimates to the higher end, projecting adjusted funds from operations per share to reach $2.45, up from $2.44. He expressed continued appreciation for Vici's effective execution and the stability of its rent payments, especially amidst broader macroeconomic uncertainties.
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