International Gaming Technology PLC (NYSE: IGT) provides worldwide electronic gambling, gaming, and lottery products and services. It’s well known for providing most of the slot machines in Las Vegas in the pre-pandemic era. The company has expanded to include digital games through its PlayDigital segment in addition to its Global Gaming and Global Lottery segments. PlayDigital develops online and mobile casino games in established regulated markets. They also partner with established land-based casinos and online gaming operators to include PlayDigital games on their platforms. In February, the company announced a complicated deal to split its Lottery and Gaming divisions.
IGT operates in the consumer discretionary sector, competing with Light & Wonder Inc. (NASDAQ: LNW), Playtech PLC (OTCMKTS: PYTCY) and DraftKings Inc. (NASDAQ: DKNG).
Deciphering IGT’s Division Split with Everi
IGT announced a division split on Feb 29, 2024, between its lottery segment and gaming segments. Its Global Gaming and PlayDigital, which includes online casinos, iGaming and sports betting products, will be split from its Lottery segment. The two gaming divisions will be merged with Everi Holdings Inc. (NYSE: EVRI), a rival gaming technology company, to form a new entity under the International Gaming Technology name and stock symbol in a $6.2 billion deal.
Existing IGT shareholders will own 54% of the combined gaming company and Everi shareholders will hold the remaining 46%. The lottery business will change its name and receive a new stock symbol. The businesses will be separated through a taxable spin-off to IGT investors and merged with Everi. The deal is expected to close by the end of 2024 to early 2025. The lottery unit recently closed a 7-year deal with the Colorado lottery.
The Goal of the Spin-Off Merger
The goals for the transaction are clear. Management has felt that the market has undervalued the company's intrinsic value for too long. It also wants to ensure clarity of focus between the divisions so the lottery business can focus on lotteries and the gaming divisions focus on games. The confusing part of the deal is that the new entity will still trade under the IGT stock symbol and keep the International Gaming Technology name but merge with Everi to become a powerhouse gaming company. The lottery unit will also trade as an independent public company on the NYSE under a new stock symbol and a new name.
IGT Stock is in a Descending Triangle Pattern
The daily candlestick chart on IGT is in a descending triangle pattern. This pattern is comprised of a falling upper trendline connecting the lower highs on bounces, meeting the flat-bottom horizontal lower trendline at $19.80 at the apex. As time wears on, the trading channel between the upper and lower trendlines gets smaller until an imminent breakout through the upper trendline or breakdown through the lower trendline forms. The daily relative strength index (RSI) bounced to the 59-band as bulls attempted to break out again. Pullback support levels are at $19.80, $18.90, $17.52 and $16.46.
Growth Slowing
IGT reported Q1 2024 EPS of 46 cents, beating consensus analyst expectations by 15 cents. Revenues rose 1% YoY to $1.07 billion, beating $1.03 consensus estimates. The strength was carried mostly by its Lottery segment, which was partially offset by its gaming and digital product sales. Operating income of $256 million was in line with the year-ago period. Operating margin exceeded expectations by 400 bps at 24%. Adjusted EBITDA margin was 41.5% on its adjusted EBITDA of $443 million.
Raising Full Year 2024 Forecasts
Based on its robust Q1 2024 performance, IGT raised its full-year 2024 revenue guidance to $4.4 billion, beating consensus estimates of $4.36 billion. However, Q2 2024 revenue expectations were soft at $1.05 billion versus $1.09 billion consensus estimates.
IGT CEO Vince Sadusky commented, "Innovative game, hardware, and systems solutions drove better-than-expected Global Lottery and Gaming & Digital performance in the first quarter.”
Sadusky concludes, "As a result, we are upgrading our full-year 2024 revenue and profit goals, which reflect broad-based momentum across key performance indicators in the balance of the year. We continue to make progress on separating Global Lottery from Gaming & Digital and preparing for the proposed transaction with Everi."
International Gaming Technology analyst ratings and price targets are at MarketBeat. The consensus analyst price target of $28.00 implies a 24.3% upside. There are six analyst ratings for IGT comprised of four Buys and two Holds.
