Shares of Accel Entertainment Inc (NYSE: ACEL) are up 33% this year, but Macquarie Group says it has reasons to believe the stock is still fairly inexpensive.
Jordan Bender raises his price target on ACEL
In a note to clients on Friday, Macquarie’s Jordan Bender upgraded Accel Entertainment to “outperform” with a price target of $17 that translates to a 32% upside from here. Previously, the analyst had a price target of $15 on the stock.
Distributed gaming remained strong in the face of the Delta variant earlier this year, and Bender is convinced it can repeat history amidst rising concerns of Omicron. He sees this sector as a safe bet for investors interested in playing the gaming industry in 2022. He wrote:
It’s the video gaming terminals (VGT) resiliency, particularly during the COVID-19 restriction periods, that help form our more bullish thesis around ACEL.
According to Bender, Accel has stable fundamentals, but the stock is underappreciated at 6.4 times the estimated 2023 EBITDA that implies significant room to run in the coming months.
Other reasons why he’s bullish on the stock
Other reasons he likes ACEL include its strong balance sheet, which might prompt expansion into other markets, such as Georgia, Missouri, and Pennsylvania. The recently announced $200 million share buyback, he added, could also help the stock’s move up.
Bender expects distributed gaming to be in demand even after the pandemic. He said:
After almost all sectors reopened, we became further constructive on the strength of distributed gaming. For instance, location hold per day has been up to 50% above 2019 levels since April 2021, and we have seen little evidence trends are going back to pre-COVID levels.
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