Games of chance have had a place in American culture since before the United States gained its independence. Along the way, there have been lengthy periods in which some forms of gambling – and occasionally all forms of gambling – were prohibited by law.
In 1823, Louisiana experimented with legalized betting halls, turning New Orleans into the destination of choice for gamblers. When things started getting out of hand, the land-based halls were closed – but casinos moved to the water, and gambling thrived on riverboats.
By the end of the 19th century, gambling in almost every form was illegal in the United States, though of course there were still plenty of underground games for the true aficionados. More importantly, US territories that were not yet states still allowed gaming in all its forms. They didn’t shut down casinos down until they were ready for statehood.
That all changed again in the 1930s when casinos were legalized in Nevada. New regulations set the stage for Raymond Moloney to found Bally’s Manufacturing, where he made his fortune building pinball machines and casino games – including some of the first slot machines in the country.
Soon Bally’s began building and buying its own casinos and combination casino/resorts, along with a collection of unrelated businesses. Among other assets, Bally’s owned Six Flags and Bally’s Total Fitness for a period.
The company has changed hands, acquired and divested divisions, and explored new businesses so often that it is nearly impossible to trace a direct path from Bally’s origins to its current incarnation.
For now, the important point is that Bally’s stock is trending up again after dropping precipitously from its March 2021 high. That has investors curious – will Bally’s buyback pop the stock? And if so, is Bally’s stock a buy?
Bally’s Operates 5,300 Hotel Room, 16k Slot Machines
Today, Bally’s Corporation has 16 casinos in 11 states, including the world-famous Tropicana Hotel & Casino in Las Vegas. When combined with other properties, the company operates nearly 16,000 slot machines, along with 5,300 hotel rooms.
However, Bally’s casinos and hotels aren’t the most exciting element of the business now that gambling is going digital. Bally’s is growing its gaming assets to include popular online sports betting and gaming platforms. Some of the brands that roll up to Bally’s Corporation include Gamesys Group, Bally Interactive, Monkey Knife Fight, SportCaller, and Telescope.
Physical casinos offer an experience that can’t be duplicated online, so most industry experts are confident that Bally’s casinos have a bright future. With that said, the real growth will come from Bally’s online platforms because they offer users anytime/anywhere access from the comfort of their own homes.
Researchers suggest that the compound annual growth rate (CAGR) for the world’s online gambling and betting market will be around ten percent for the next five years. If accurate, that will take total global revenues to as much as $100 billion by 2026. Bally’s is positioned to play a leadership role in the industry, which means shareholders could see substantial returns.
Bally Revenues Soar 170% YoY
Bally’s Corporation announced its Q3 2021 results in early November 2021. There was a lot of good news, including record revenues of $314.8 million – an amount that represents an increase of nearly 170 percent year-over-year.
Despite that impressive revenue, the company had a net loss of $14.7 million – a big drop from the previous year’s $6.7 million net profit.
Adjusted EBITDA came in at $78 million, which is a year-over-year increase of $40 million. This was primarily driven by exceptional results from the Retail Casino business.
Retail Casinos delivered $301.6 million in total revenue, with net income of $49.4 million – more than double the $22.1 million for third-quarter 2020.
Why Did Bally Stock Fall?
After peaking at more than $75 per share last year, Bally’s stock has lost a lot of ground. In mid-January 2022, it bottomed out at just over $26 per share. A lot of that has to do with Bally’s mixed financial results. The most recent earnings report included a net loss that had investors concerned.
There are reasonable explanations for the decline in profits, including the costs associated with major acquisitions like Gamesys, but investors also heard about steep capital expenditures, the business impact of natural disasters, and debt that would cause most management top brass to lose sleep. Combined, those factors prompted Bally’s stock to fall.
Will Bally Stock Recover?
Bally’s is investing heavily in online gaming, and it introduced several new apps in 2021.
In the company’s third-quarter 2021 earnings call, management announced that they have been laser-focused on the next version of Bally’s flagship app. It is currently expected to go live in the first half of 2022.
This app is most popular for sports offerings, but that’s just the tip of the iceberg in terms of features. Bally’s is expecting substantial growth as the app is rolled out in most states.
That news didn’t especially inspire investors during the fourth quarter of 2021, but many analysts believe that enthusiasm will increase once financial results prove a return on investment in the app. If true, there is every reason to believe that Bally stock will recover.
Will Bally Buyback Pop The Stock?
There was a sudden increase in Bally’s stock price the last week of January, and it had nothing to do with the company’s product lineup. The nearly 25 percent boost in share prices came about because investors had a strong reaction upon learning of an unsolicited takeover offer.
The private equity firm Standard General filed SEC documents pointing out that it already has a 21 percent stake in Bally’s Corporation. Standard General stated that it wants to buy the remaining shares of Bally’s at $38 each.
Considering Bally’s stock was trading around $27 per share before this information became public, investors were quick to bid the price up to something nearer the $38 per share proposal.
Bally Stock Forecast
The future of Bally’s stock depends on two things. First, the outcome of the proposed acquisition. A lot can happen between now and the time that sort of transaction closes, including changes in the offer price. If the deal moves forward, the details will have a significant impact on Bally’s stock price.
Second, though Bally’s casinos are raking in cash, investors are looking for returns on the large outlays that took place in 2021. If digital gaming grows at the expected rate and Bally’s delivers returns on its most recent acquisitions, the stock price is likely to see impressive gains.
Analysts have set targets between $39 per share and $75 per share for the next 12 months. If Bally’s stock hits the median target of $56.50, today’s shareholders will see an increase of nearly 57 percent. With that in mind, a majority of analysts have rated Bally stock a buy.
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