On Friday, B.Riley resumed coverage on International Game Technology (NYSE:IGT), issuing a Buy rating with a new price target of $30.00. The firm's analysis suggests that International Game Technology, referred to as RemainCo, is expected to become a pure-play lottery company following its upcoming merger with EVRI, known as MergeCo, within the next six to nine months.
The coverage highlights that RemainCo is currently trading at 7.5 times and 6.7 times its calendar year 2024 and 2025 enterprise value to EBITDA (EV/EBITDA) respectively. This valuation is notably lower than the average and median EV/EBITDA of other lottery companies, which stand at 15.4 times and 9.9 times, respectively.
B.Riley points out that after the divestiture of its game business, RemainCo's focus on lottery operations will align it more closely with industry valuation standards. The firm anticipates this strategic shift will act as a catalyst for a re-rating of the company's shares in the market.
Additionally, it was noted that investors in RemainCo will acquire 54% of the shares in MergeCo as part of the transaction. B.Riley values these additional shares at over $1 billion before tax, considering them a significant bonus for shareholders investing prior to the completion of the merger.
InvestingPro Insights
As B.Riley resumes coverage on International Game Technology with a positive outlook, current market data from InvestingPro provides further context. With a market capitalization of $4.25 billion and a P/E ratio of 25.07, IGT's valuation reflects its industry position. The adjusted P/E ratio for the last twelve months as of Q4 2023 stands at 22.37, indicating a slight discount compared to the current P/E ratio. Revenue growth remains modest at 2.04% for the same period, signaling steady business performance.
InvestingPro Tips shed light on additional factors that could influence investor sentiment. Analysts are expecting sales growth in the current year, which aligns with B.Riley's positive projection for RemainCo's future as a pure-play lottery company. However, it's worth noting that two analysts have recently revised their earnings estimates downwards for the upcoming period. This suggests a need for investors to monitor potential shifts in company performance closely. Additionally, the company's ability to maintain dividend payments for 10 consecutive years underscores a commitment to shareholder returns, a relevant factor for investors seeking stability in their investments.
For those looking to delve deeper into the nuances of IGT's financial outlook, InvestingPro offers additional insights. There are 7 more InvestingPro Tips available, which could provide a comprehensive understanding of the company's potential trajectory. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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