Analyst Endorses Inspired Entertainment Amidst Rough Year, Predicts Resurgence

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The past year has been turbulent for Inspired Entertainment (NASDAQ: INSE), the provider of video gaming terminals (VGT) and software. The company’s shares have tumbled 21.70%, brought on by a shadow cast by the regulatory review surrounding its adjusted 2023 earnings. Yet, there are voices in the market that consider the stock’s current situation as an opportune moment for investors.

One such optimist is Truist Securities’ analyst, Barry Jonas, who recently conveyed to his clientele a strong “buy” rating for Inspired Entertainment. This verdict was accompanied by a price target forecast of $13, an increase that would equate to a 41.30% leap from its close on Tuesday.

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In Jonas’ perspective, the ongoing Securities and Exchange Commission (SEC) investigation, which was initiated to check the propriety of Inspired’s restatement of 2023 earnings, is a matter of routine. The analyst caveats his recommendation by pointing out that the company’s valuation appears to be increasingly attractive, citing declarations by the company’s management of an expected strong growth in the latter half of the present year.

One indication of its growth prospects can be found in its capabilities to power forward in the interactive gaming market, driven mainly by its robust content library. The current landscape only allows for six states to permit internet casinos. Yet, operators within these jurisdictions continue to introduce fresh offerings, seeking to gain a larger market share, boding well for Inspired.

The company’s latest quarterly earnings reflect its potential. The reported revenue of $78 million exceeded mainstream expectations. Simultaneously, it managed to generate a free cash flow of $27 million, an impressive achievement for a firm with a market capitalization of $237.81 million.

These successes have been undergirded by the steady pace of orders for its internet casino equipment and its potential to capitalize on growth opportunities in locales like Brazil and parts of Latin America.

Jonas has touted Inspired’s involvement in the internet lottery space as a significant contribution to its potential for growth. Despite not being as conspicuous as internet casinos or sports betting, some analysts perceive immense opportunity in online lotteries. They predict this sector could eventually hold toe-to-toe with online sports wagering. The profitability and cash generation that lottery assets provide serve to enhance the attractiveness of Inspired’s story.

Having tidied its balance sheet and reduced leverage, Inspired is well-positioned to partake in the expected industry consolidation come in 2024. Even though its shares may appear cheap at the moment, Inspired is generating free cash flow, a feat few of its competition can claim. Furthermore, the company has $13 million set aside for repurchasing its stock, an initiative it halted while dealing with the earnings restatements, bolstered by a robust $40 million cash in hand. All of it lends to the growing perception that Inspired’s saga may indeed undergo an inspiring turn in the times to come.