Shares of casino fintech company Everi Holdings (EVRI 0.81%) jumped as much as 27.5% on Friday after the stock got a big upgrade from an analyst. At 1:40 p.m. EDT shares were up 24.1% and holding very strong gains.
Analyst David Bain from Roth Capital was the one who caused shares of Everi to jump today when he put a buy rating and a $17 price target on the stock. Based on his estimates for calendar year 2022, he believes the average gaming supplier enterprise value-to-EBITDA multiple is 7.3, which would put shares at $11.50 apiece. He also thinks the company deserves a premium, which gets him to $17 per share.
That's a pretty significant upgrade: Everi stock closed yesterday at $4.66 per share. So the price target is nearly 4 times the trading price, a big jump even for the best growth stocks.
EBITDA might be a commonly used metric in the gambling industry, but I'm not sure it's a good metric for Everi. The company makes kiosks and game cabinets that clearly have a useful life that's much shorter than a casino or the land a casino sits on. And the difference between the company's $253.2 million in adjusted EBITDA in 2019 and its $16.5 million in net income is driven by the depreciation being pulled out from EBITDA. There's a reason companies need to depreciate assets with a limited life. It's a very real cost that I think investors are overlooking in Everi's case.