Shares in International Game Technology (IGT) recently underwent a powerful uptick following an upgrade premised on the firm’s expanding lottery footprint and minimized perils in the Italian marketplace. The stock fortified its position significantly early in the day, largely due to the Rebalancing Act, crafted by Stifel analyst Jeffrey Stantial.
Stantial ramped up IGT’s rating from a standard “hold” to a more promising “buy”, while simultaneously raising his price target for the stock from $24 to $26. The revised forecast implies an impressive upside surpassing 30% from the incumbent levels. Stantial contends that IGT’s moves to split and merge its global gaming and PlayDigital sectors with Everi could have been a cloud over the stock. Still, the impact of the decision is expected to dissipate once the deal is finalized.
Regardless of the company’s positive updates and the robust Q1 lottery trends, the gloom continues to cascade over the IGT shares. As Stantial pointed out, although there remains a risk that IGT could be “dead money” before the deal’s closure, it’s more prudent being too early than too late.
According to the terms of the agreement, IGT’s investors will command 54% of the new enterprise, with Everi shareholders holding the remaining 46%. The merger is projected to close around the end of this year or the beginning of the following one. IGT’s struggles in Italy have also been part of the equation pulling its stocks down. The country is the Eurozone’s third-largest financial hub and was responsible for a crucial portion of IGT’s earnings in 2023.
On a more optimistic note, IGT’s first-quarter earnings presented a promising outlook for the Italian retender. As Stantial deduced, only Sisal is likely to contest IGT for the Italian contract, and there’s a possibility that Sisal’s parent company, Flutter Entertainment, might hesitate to spend the required $1.1 billion.
IGT’s strategic recalibration, which was announced nearly a year ago, projected a possible $4 billion to $5 billion from selling its global gaming and PlayDigital units. However, with the Everi deal valued at $6.2 billion, it seems IGT might have undersold itself. As a result, analysts argue IGT’s lottery assets have been undervalued by the market, which often overlooks this segment when it is attached to conglomerate-like gaming companies. This could enable IGT to forge a new narrative as a more lottery-centric business and a more straightforward investment prospect.
