IGT achieves sales plan price increase target
Earlier this month, International Game Technology (NYSE: IGT ) announced plans to explore strategic alternatives for its global gaming and PlayDigital divisions, a news that received a positive response from analysts and investors.
In a new note to clients, Stifel analyst Jeffrey Stantial reiterated a "buy" rating on IGT and raised his price target on the stock to $38 from $32. That’s an increase of 25% from the June 23 closing price. IGT has the potential to merge, sell or spin off these companies. The company noted that it may also retain these units and increase related investments. However, analysts believe a sale or spin-off is the most likely outcome.
Our key takeaways from this analysis include: 1) There is more to the target buyer pool than intuition suggests. 2) The potential to expand global gaming profits and its positioning on the high-growth iCasino content opportunity make IGT an attractive target for "financial and strategic buyers," Stantial noted.
Stantial added that if IGT ultimately spins off its global gaming and PlayDigital businesses, the new company would become an independent lottery company that could "earn a higher valuation."
Now is a good time for IGT to consider derivatives
In November 2021, IGT announced that it would consider spinning off its iGaming and sports betting divisions. However, action in this regard is limited to this month.
For years, analysts and investors have pondered whether and when the company would consider spinning off its global gaming business. That way, the company's highly profitable lottery division could gain more recognition in the investment community. During this period, IGT's board of directors and management team were unwilling to explore such a transaction. But views appear to have changed.
Stantier added: "We highlight the recent leadership transition, with current CEO Vince Sadusky bringing a new perspective to the company, largely based on his experience outside of the gaming industry "Similarly, we believe former CEO Marco Sala brings a new perspective to IGT's largest shareholder as he transitions from De Agostini to CEO (note that De Agostini currently holds approximately 62% of voting rights)."
If the company spins off its Global Gaming and PlayDigital divisions, its lottery business (which accounts for 75% of projected revenue) may finally get the respect it deserves from investors.
IGT Global Gaming Division can attract a wide range of applicants
Although IGT has not officially said whether the above-mentioned business will be sold or spun off, this may provide impetus for the sale of the global gaming unit. This is because business is improving and a variety of applicants can be attracted with compelling offers.
IGT has streamlined the business in recent years by selling non-core assets, a move that resulted in cost savings of more than $210 million. The deal could be attractive to buyers as the casino upgrades its slot machines. In terms of market share, IGT is one of the three largest slot machine manufacturers in North America.
“IGT’s market-leading share in the VLT and Bartop segments has proven to be more stable than expected following the launch of its competitors,” Stantial concluded. “Of course, the North American slot machine market is as competitive as ever, with most of the major players having strong products, although it is clear that IGT has at least stabilized its market share after about a decade and a half of decline, which may even indicate some reason to be optimistic about further market share growth in the coming years.”
Read also:
- U.S. cities with the most Swifties per capita
- Blackjack Casino Advantage: How to Beat the Odds
- Football 101: What is relegation in football?
- Star Entertainment sells Sheraton Mirage Gold Coast Resort
Source: www.casino.org
