On Thursday, Stifel changed its rating for International Game Technology (NYSE:IGT), upgrading the stock from Hold to Buy and adjusting the price target to $26.00, up from the previous $24.00.
The firm's decision comes after a reassessment of the risks associated with the company's Gaming & Digital spin-off and the Italy Lotto contract tender.
Stifel noted that International Game Technology had provided more details on the Lotto tender, which included a joint venture consortium and an unchanged 6% take-rate. This disclosure significantly mitigated the risk of displacement or return on investment erosion for the company.
Additionally, despite positive updates and strong lottery trends observed in the first quarter, IGT's share price has not reflected these developments, which Stifel attributes to potential overhangs from the upcoming spin-off.
The firm also mentioned that while there is a possibility that IGT's shares could remain stagnant in the near term, they prefer to take the risk of entering the stock early rather than late.
This stance is especially pertinent considering the second half of the year is expected to see a weighted launch cadence of lottery content. Stifel believes that the anticipated timing of the spin-off's closure falls within their near-term investment rating horizon.
International Game Technology's recent developments and Stifel's upgraded outlook suggest that the company has navigated through earlier uncertainties regarding its business restructuring and contract tenders. Stifel's new price target and buy rating reflect a more optimistic view of IGT's financial prospects going forward.
InvestingPro Insights
In light of Stifel's recent upgrade of International Game Technology (IGT), examining the company's financial metrics and market performance can provide additional insights. According to InvestingPro data, IGT currently has a market capitalization of around $3.85 billion, with a P/E ratio of 16.72, which adjusts to 14.95 for the last twelve months as of Q1 2024. The company's revenue growth over the last twelve months is modest at 1.94%, reflecting a stable but not rapidly expanding business.
From an InvestingPro Tips perspective, while analysts anticipate sales growth in the current year, IGT is trading at a high P/E ratio relative to near-term earnings growth, which suggests that the market has high expectations for its future earnings. Additionally, the stock has experienced significant price volatility, with a price decrease of over 29% over the last three months, which may present a buying opportunity for investors who believe in the company's fundamentals and future prospects. Notably, IGT has maintained dividend payments for 10 consecutive years, with a current dividend yield of 4.23%, which could appeal to income-focused investors.
For those interested in further analysis, InvestingPro offers additional tips that can help investors make informed decisions about IGT. Readers can use the exclusive coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these insights. With the next earnings date on July 30, 2024, investors have the opportunity to review additional data points and analyst predictions on InvestingPro to gauge the potential impact on IGT's stock performance.
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