Based in London, International Game Technology (IGT) is an end-to-end gaming company. It provides a range of services and technology products across lotteries, machine gaming, sports betting, and interactive gaming markets in North America, Asia, and Europe. IGT previously operated through four segments — North America Gaming and Interactive (NAGI), North America Lottery, International, and Italy. But under a new organizational structure, it now operates through two segments — Global Lottery, and Global Gaming.
The company’s record revenue generation for the third quarter (ended September 30) was driven by the strongest lottery same-store sales growth it has seen in seven quarters. With stronger player demand, and a host of compelling new games, IGT’s digital and betting revenue has increased 41% year-over-year to $104 million. The company even launched a full-service, in-house U.S. sports betting trading team in the third quarter.
Over the past six months, the stock rallied more than 81% to close yesterday’s trading session at $16.14. The company's resilient business model, characterized by robust recurring revenues, and its balanced geographic and product mix with potential upside based on several factors, have helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates IGT:
Trade Grade: A
IGT is currently trading above its 50-day and 200-day moving averages of $12.74 and $11.01, respectively, indicating an uptrend. Moreover, IGT has gained 25.3% over the past month, reflecting solid short-term bullishness.
The company’s revenue has climbed 54% sequentially to $981.5 million for the third quarter ended September 30,2020. It was primarily driven by strong lottery same-store sales growth and sharp improvements from the second quarter across all major revenue sources. Global Lottery revenue increased 3% year-over-year to $570 million. Revenue from the U.S. and Canada accounted for more than 45% of total revenue. Non-GAAP EPS increased 23.8% year-over-year to $0.26.
On December 18, IGT announced that its subsidiaries IGT Europe B.V., IGT Austria GmbH, and IGT Germany Gaming GmbH had entered a strategic agreement to exclusively license the intellectual property for its GALAXIS and SYSTEM2Go casino central management systems (CMSs) to Modulus S.a.r.l. On December 16, IGT announced that it had replaced a competitor's system with its IGT ADVANTAGE Casino Management System (CMS) at the newly reopened Carousel Casino in South Africa.
The company announced on November 23, that it has entered a multi-year agreement with Maverick Gaming, according to which IGT will provide its PlaySports turnkey solution to Grand Z Casino and Johnny Z's Casino in Central City, Colo. and Z Casino in Black Hawk, Colo. IGT’s subsidiary IGT Global Solutions Corporation signed a seven-year contract with the Nebraska Lottery in November to serve as the primary vendor for its instant and draw-based games and related services.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, IGT is well positioned. The stock is currently trading 4.6% below its 52-week high of $16.92, which it hit on December 18.
The company’s long-term growth can be attributed to the launch of new games, portfolio optimization, price upselling, improvement of prize structures, and expanded distribution.
Peer Grade: A
IGT is currently ranked #6 of 23 stocks in the Entertainment - Casinos/Gambling industry. Other popular stocks in the entertainment - casinos/gambling group are Caesars Entertainment Corporation (CZR), MGM Resorts International (MGM), and Las Vegas Sands Corp. (LVS).
While CZR outran IGT, gaining 28.9% over the past year, MGM, and LVS have lost 8.9%, and 17.9%, respectively, over the same period.
Industry Rank: C
The Entertainment - Casinos/Gambling industry is ranked #66 of the 123 StockNews.com industries. With the temporary closures of the land casinos, the global gambling industry was severely affected by the COVID-19 pandemic. However, the online gambling industry has grown significantly. In fact, the United States online gambling market is expected to grow at a CAGR of 15.41% in the next five years.
Technological advancements, the existence of virtual reality, and increased security and privacy has ushered in a change in the consumer behavior in this industry, which is expected to be sustained over the long term.
Overall POWR Rating: A (Strong Buy)
Overall, IGT is rated “Strong Buy” based on its short- and long-term bullishness and solid growth prospects, as determined by the four components of our overall POWR Rating.
Going into 2021, IGT has the potential to appreciate based on its continued business growth, favorable earnings and revenue outlook, and strong financials. The company is well positioned to benefit from a global market recovery.
The consensus revenue estimate of $4.28 billion for the next year represents a 21% increase year-over-year. Moreover, IGT has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow at 718.7% next year.
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IGT shares were unchanged in after-hours trading Wednesday. Year-to-date, IGT has gained 12.74%, versus a 16.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.Is International Game Technology Stock Worth Betting On? appeared first on StockNews.com