International Game Technology was a winner (NYSE:IGT)
International gaming tech may struggle to push too high
International Game Technology (IGT) has performed well over the past year rising around 56% over the same period and up over 120% since our last bullish article on the stock. IGT specializes in providing gaming technology products and services worldwide. It operates in two segments, Global Lottery and Global Gaming. The company has done a fantastic job of expanding its sports betting deals left and right over the past year, resulting in renewed growth and value. This, combined with sector tailwinds, helped push the stock to 10-year highs, which looked likely to continue until recent macroeconomic headwinds slowed growth.
At current prices, IGT’s valuation could offer a potential upside of up to 20% from current prices based on comparisons with peers as well as Wall Street analysts and an asymmetrical 20% downside if support resisting further macroeconomic headwinds due to rising rates. This presents a rather neutral investment opportunity for a title in the hot gaming industry.
IGT trades at a price-to-earnings ratio of 17.4x earnings. This is, for the most part, in line with peers indicating that the stock is priced fairly against competitors. Boyd Gaming (BYD) seems to be the cheapest of the bunch for those looking to enter the gaming industry at a fair value.
Figure 2. IGT looks relatively well-valued at a PE ratio of 17.4x earnings
Looking more towards growth, we see that IGT is growing at around 44% per year. That’s faster than most of their competition and explains the run the stock has been able to go on. This growth has come as a bit of a surprise and has resulted in a number of analysts’ upgrades and it could continue as the company has made quite a name for itself in the sports betting industry which is becoming legal in more and more countries. ‘states. Keeping an eye on this metric will be crucial in future earnings as growth is expected to slow next year.
Wall Street analysts are also behind IGT with an average analyst rating of $40 signaling up to 55% upside from current prices. Expect these price targets to drop as we expect analysts to adjust PTs based on recent declines from the highs of around $33 to the mid $20s we have seen in recent weeks following pullbacks .
The aforementioned combination of fair value, continued momentum, industry-leading growth, consistent earnings, and a 0.7% dividend yield makes a fair argument for IGT’s stock going forward. future, although gains are certainly tougher in 2022 than last year with rising rates and COVID spikes early in the year so far.
IGT currently has approximately $6.8 billion in debt, of which approximately $6.5 billion is long-term debt and the remaining short-term debt. This is quite a large amount, so it should be watched in the future, as always. If COVID shutdowns were to hit again, IGT could be in trouble because time is money for businesses.
Based on historical data and looking at IGT’s stock charts, it becomes apparent that there is a fairly strong support line around the $21.50 mark since this fall. This would indicate up to 20% downside risk going forward, barring further macroeconomic headwinds.
Summary of investments
Walk into any casino and you will see that IGT is an industry leader. Expect growth to continue, but at a potentially reduced pace next year. Again, with upside potential of up to 20% over a period of approximately 1 year due to increased value, continued momentum, historical leading growth, consistency reliable earnings and a dividend yield of 0.7%, IGT seems like a decent investment. go forward. In my opinion, there is still around 20% downside risk, and this should be considered when evaluating risk-reward strategies. Therefore, if it is not yet in the stock, it may be wise to wait for better entry prices that may appear in the short term. If it were to drop back below $20, it might be worth getting your feet wet to ride the wave of potentially more esports betting partnerships and, in turn, enhance growth, but at current prices, Boyd Gaming would be our choice.