Financial

IGT Top Pick In Gaming Supplier Stocks, Analyst Sets Q2 Earnings Beats

Gaming supplier stocks are outperforming shares of casino operators and the broader market this year, with International Game Technology (NYSE:IGT) among the names earning praise from analysts.

IGT slots glow inside the company’s Las Vegas showroom, pictured above. An analyst is bullish on the company and some rivals. (Image: Las Vegas Review-Journal)

In a note out Wednesday, Macquarie analyst Chad Beynon raised estimates on IGT and several other gaming suppliers, pointing out that investors are better understanding “the valuable parts of these tech companies.”

Favorable points include recurring businesses with quickly rebounding attributes in cashless gaming, iLottery, iGaming, and online sports betting, the analyst notes.

Heading into Q2 prints, we are raising our estimates for the supplier group, given the strong underlying consumer, and we believe there are several positive attributes/catalysts to own the category,” Beynon continued.

Cementing the bullish showings of supplier equities this year, the Association of Gaming Equipment Manufacturers (AGEM) Index is residing near all-time highs. The Index includes a basket of names including IGT and Scientific Games (NASDAQ:SGMS), among others.

Bullish on IGT

Beynon is enthusiastic about IGT, as he raises his price target on the name to $36 from $34, implying a significant upside from the July 13 close of $22.70. The UK-based gaming technology company provides back-end services and solutions for lotteries and sportsbooks around the world, and also manufacturers slot machines.

The analyst says following the sale of IGT’s Italian digital gaming, gaming machine, and sports wagering operations, which was announced last December, leverage should decline to 4x and could prompt the company to reinstate its dividend.

“As the world’s lottery leader, we expect a multiple rerate and believe there’s a large iGaming margin,” said Beynon.

Macquarie forecasts the iGaming industry ascending to $23 billion in 2030, 70 percent of which will be derived from slots. That could be a boon for IGT and rival Scientific Games because as the research firm notes, those companies each control about 20 percent of the online slots market.

Beynon Nods to Scientific Games

Scientific Games is another gaming supplier stock liked by Beynon. The analyst boosted his price target on that name to $69 from $63. The new forecast is roughly in line with where the shares currently trade.

Investors took profits in the name after the company said late last month it will divest its lottery management and sports wagering units. That transaction could come in the form of an initial public offering (IPO), a combination with a blank-check company, or an outright sale, or a merger with another firm.

“Following the strategic call, we expect strong deleveraging,” said Beynon of Scientific Games.

The analyst also increased price forecasts on Everi (NYSE:EVRI), Inspired Entertainment (NASDAQ:INSE) and NeoGames (NASDAQ:NGMS).

Todd Shriber

Gaming Financials, Casino Business----Todd Shriber got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long/short hedge fund, where he specialized in trading sector and international ETFs leading up to and during the financial crisis. Currently, he analyzes, researches, and writes on ETFs for a variety of Web-based publications and financial services firms. Shriber has been quoted in Barron's, CNBC.com, and The Wall Street Journal. His work has been published on sites such as Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business, and Nasdaq.com. He joined the Casino.org news writing team in 2019, and lives in Southern California, where he enjoys golf and taking his black lab to the dog park. When in Las Vegas, he likes to wager on college football, the NBA, three-card poker, and roulette, even though he knows better. Email: todd.shriber@casino.org

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Todd Shriber