Analysts say Inspiration Entertainment could be an Inspiration rebound story
Inspired Entertainment (NASDAQ: INSE ) shares have fallen 21.70% over the past year as concerns arise over a regulatory investigation into 2023 earnings revisions. However, at least one analyst sees an opportunity for video game terminal (VGT) and software providers.
In a new client note, Truist Securities analyst Barry Jonas reiterated a Buy rating and $13 price target on Inspired, which implies an upside of 41.30% from Tuesday's closing price. Jonas noted that the U.S. Securities and Exchange Commission's (SEC) investigation into gaming companies' 2023 earnings restatements is "presumably to verify whether the matter has been appropriately addressed." Inspired highlighted the restatement and related costs in its annual report filed with the Securities and Exchange Commission yesterday.
Jonas said Inspired's "valuation is looking increasingly attractive," noting that management expects strong growth in the second half of the year, driven by more iGaming products.
Inspired also has the opportunity to rapidly accelerate growth in the interactive gaming space thanks to its robust content library. While the number of states that allow internet casinos remains at six, operators in these jurisdictions are taking advantage of the new content to gain market share, which could bode well for Inspired.
Inspired Interactive division is poised for growth
With Q4 revenue hitting $78 million (beating seller expectations) and free cash flow hitting $27 million (an impressive number for a company with a market cap of $237.81 million), Inspired appears poised to grow in numbers Building on success in gaming.
"The momentum observed in the interactive space has continued into the new year; last week was the busiest week in the company's history," Jonas said, citing management. Inspired has a large backlog of orders for internet casino equipment and may be affected by Supported by expected growth in Brazil and the rest of Latin America.
The analyst also noted that Inspired management "believes Virtuals is at an inflection point where new product momentum can support growth," adding that executives expect the company to generate $105 million in free cash flow this year.
iLottery supplemented with inspiring essays
Dynamics in the internet lottery space may also have a positive impact on Inspired Entertainment's investment thesis. Online lotteries don’t attract as much attention as internet casinos or sportsbooks. However, some analysts see a "huge opportunity" for internet lotteries and say the market could eventually rival the online sports betting market.
Lottery assets – both interactive and traditional – are profitable and generate funding, adding to the appeal of Inspired’s story. Other catalysts include strengthening Inspired's balance sheet, reducing leverage, and the company's potential participation in industry consolidation in 2024. Not only is Inspired's stock cheap, it's also generating free cash flow -- something few of its competitors can do on a regular basis.
Inspired also has a healthy balance sheet, with $13 million available to repurchase its own stock (which the company stopped doing due to its earnings restatement) and $40 million in cash.
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Source: www.casino.org
