Accel Entertainment stock outlook: Macquarie sees upside to $17

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.

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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 the strength of its balance sheet that recently prompted the Board of Directors to authorise a new $200 million share buyback programme.

Bender sees it likely that Accel Entertainment will choose to expand into other markets, such as Georgia, Missouri, and Pennsylvania, that could help the stock move further up. He doesn’t expect the demand for distributed gaming to wave anytime soon.

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.