On Thursday, Susquehanna made an adjustment to the price target for International Game Tech (NYSE:IGT), lowering it to $33.00 from the previous $40.00 while still maintaining a positive outlook on the company's stock. The gaming company's shares have seen a significant decline of 30% since the early fourth quarter of 2023.
Initially, concerns about a potential non-sale and the risk associated with the renewal of the Italian Lotto contract caused the stock to drop from approximately $30 to around $25. Subsequently, the announcement of a planned separation through a carve-out/merger with EVRI further drove the price down to about $20 from $25.
Despite International Game Tech reporting first-quarter 2024 results that exceeded market expectations, the stock price has been heavily influenced by expectations surrounding the company's separation process and the looming uncertainty over the renewal of its Italian Lotto contract, which accounts for about 20% of its lottery segment's results.
The market is anticipating catalysts that could alleviate these concerns, with significant developments expected to begin in mid-June with the S-4 filing, which could attract event investors. Additionally, the outcome of the Italian Lotto contract renewal, with a decision expected in the third quarter of 2024, is highly anticipated.
Susquehanna has reiterated its positive rating on International Game Tech but has revised its estimates downward, falling below company guidance. The new price target of $33 is based on a worst-case scenario where the merger with EVRI does not occur and IGT proceeds with an independent gaming spin-off.
It also takes into account the potential for IGT's lottery division to secure the Italian Lotto renewal, with an expected announcement in the first quarter of 2025. The valuation reflects multiples of only 7x for the Lottery segment and 5x for Gaming.
InvestingPro Insights
As International Game Tech (IGT) navigates a challenging period marked by stock price volatility and strategic corporate actions, real-time data from InvestingPro provides a clearer picture of the company's financial health. With a market capitalization of approximately $4.12 billion and a P/E ratio of 18.24, IGT is trading at a high valuation relative to near-term earnings growth. An adjusted P/E ratio of 15.96 in the last twelve months as of Q1 2024 indicates a slight moderation in this valuation metric. The company's revenue has grown modestly by 1.94% over the last twelve months, reflecting a stable yet conservative growth trajectory.
InvestingPro Tips suggest analysts are optimistic about IGT's sales growth in the current year, which may signal confidence in the company's ability to navigate its ongoing challenges, including the Italian Lotto contract renewal. Furthermore, IGT's commitment to maintaining dividend payments for 10 consecutive years, with a current dividend yield of 3.89%, demonstrates a dedication to shareholder returns even amidst corporate restructuring.
For investors looking to delve deeper into IGT's financials and future prospects, additional InvestingPro Tips are available, which could provide further insights into the company's performance and market position. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and unlock a total of 8 InvestingPro Tips for a comprehensive investment analysis.
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