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International Game Technology: Good Short Opportunity

by: Steve Patterson September 28, 2008 | about stocks: IGT    

Steve Patterson

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Shares of International Game Technology (IGT) have rallied 9% from their 52-week low struck on the 23rd of September and present a good opportunity to short the stock. The stock again rallied 10.2% on Friday on a Goldman Sachs analyst opinion of increased sales in the next quarter.

Fundamentals

IGT's fundamentals are not great, which have caused the stock to fall 60% over the past 52 weeks to a low of $15.22 on September 23rd. Sales are decreasing 3% for the year compared to their last fiscal year. And earnings are decreasing 15% from a year ago period. The stock pays out a 3.5% dividend which would be appealing if the stock hadn’t fallen as much as it has this year.

Goldman Sachs

Analysts are more upbeat about next year as they predict an increase of 3% in revenue and 11% in earnings. Steven Kent at Goldman Sachs cited two reasons in a report Friday why the company’s revenues could increase in the near future, a November trade show and November ballot initiatives to allow more gambling in states with budget shortfalls. He feels these two factors could offset losses in revenue from delayed casino replacements and expansions.

The Trade

The gambling industry is still weak and I cannot see states making large investments in gambling in time to increase the company’s earnings before its next two announcements. The stock should fall back to the mid 15 level before any improved earnings or revenue numbers are available. This is a good opportunity to short the stock.

Disclosure: None

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This article has 4 comments:

  •  
    Sep 28 02:20 PM
    The time to short IGT was when it was trading at $50/share. Now it is time to buy these shares. Both Goldman and Jim Rogers at Ariele are positive on IGT. I have bought and sold this a number of times over the years, buying when things looked bleak (at the bottom of the gaming cycle). On a long term basis (the only real basis that investors should ever really consider) this is excellent value now.

    Edward Roche, President Freedom Mountain Investments
    Reply
  •  
    Sep 29 10:59 AM
    What a joke. Where were you when the stock was in the high 40s? This stock is basically at 10X 2007 earnings. SB is coming and will drive a monster replacement cycle. Now is the time to be buying.
    Reply
  •  
    Sep 29 01:11 PM
    Agree with the others, trying to clip 2 bucks at the bottom is stupid.
    Reply
  •  
    Sep 29 05:29 PM
    I never respond to these things, but this article is ridiculous. Shorting IGT now for $2 is the best idea you have????

    The responses above are correct, server-based gaming in 2010 will have this stock up 50% or more by mid -09.
    Reply
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