International Game Technology a Value Bet, Says Analyst

Shares of International Game Technology (NYSE: IGT) are higher past 42.64% yr to date, but that scintillating running doesn’t connote a lack of value.

Following a arcsecond quarter in which the company’s gaming and lottery units displayed all the way momentum, some analysts are progressively bullish on IGT, with some highlighting the stock’s value proposition. That radical includes B. James Whitcomb Riley analyst Saint David Bain who, in a promissory note to clients on Wednesday, reiterated a “buy” rating and $43 price mark on the stock. That implies upside of almost 43% from the Aug 1 close.

We await IGT to bring forth o'er ~70% of its CY23E Earnings Before Interest Taxes Depreciation and Amortization from its world-wide drawing business. Although drawing comps switch at ~11x CY23E EV/EBITDA, and recent lottery M&A multiples chain from 12.1x to 14.3x, IGT trades at 6.6x CY23E EV/EBITDA,” wrote Bain. “IGT generates ~25% of EBITDA from gaming, and IGT’s consensus gaming EBITDA maturation far outpaces all peers, yet IGT trades 15% to a lower place the casino supplier match ordinary and turns infra “large” competitors.”

IGT’s lottery business, which accounts for 75% of pro-forma earnings, is a major earnings before interest, taxes, depreciation, and amortization (EBITDA) driver, and undervalued congenator to competing assets.

IGT Taking Steps to Clean Up Investment Thesis

While lottery businesses, including IGT’s, are usually highly profitable, cash-generating segments, US investors don’t consistently dedicate those trading operations the deferred payment they deserve.

That despite Americans’ penchant for throwing billions of dollars yearly at various lottery games. To some extent, IGT is impaired past this scenario as investors be given to allot a “conglomerate discount” to the stock. IGT isn’t sitting lazily by. It proclaimed in June that it’s mulling strategic alternatives for its worldwide gaming and PlayDigital units — moves that could unmortgaged up the broader investiture thesis and place a spot on the profitable lottery arm. Those could follow attractive assets to prospective buyers.

“In gaming, IGT is the world-class provider to report. However, we trust gaming Y/Y Earnings Before Interest Taxes Depreciation and Amortization growing will demo improve than all peers piece gaming metric growing will demonstrate higher up the equal group — IGT is taking market place share,” added Bain. “IGT’s 2Q NA install lowly was +4% Y/Y and +1% Q/Q. 2Q pronounced IGT’s 4th sequential set up mean growth and endorse sequential Y/Y increase.”

Bain observed that strength inwards IGT’s digital and gaming segments could potentially “lubricate optionality” regarding transactions involving those businesses.

IGT Right Lottery Play

The odds of winning any lottery, net ball alone Mega Millions or Powerball, are scant, but investors power find significantly amend probabilities with shares of IGT, a society with crystalize purchase to the drawing theme.

Owing to its drawing exposure, IGT benefits from increasing jackpots because those come-on more players to the pool.

“While BH23 lottery comparables are hard granted big BH22 jackpots, we believe larger jackpots are decent more common, and 3Q should welfare $5M+ from higher Powerball and Mega Millions jackpot levels,” concluded Bain. “Notably, NA SSS trends improved Q/Q and into July. Along with unique, long-term ontogeny drivers such as iLottery, we tone IGT’s continued geographic expansion/market part gains, with IGT’s Federative Republic of Brazil re-entry a warm object lesson of such.”

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