International Game Technology (NYSE:IGT) is reshuffling the top executive spot at the company, saying today Vincent Sadusky will become chief executive officer on Jan. 24.
Sadusky replaces Marco Sala, who is becoming chairman of the board, and likely CEO as well, at De Agostini — IGT’s majority shareholder. Sala took the top spot at IGT in 2015, when GTECH, an Italian gaming company, acquired the slot machine manufacturer for $6.4 billion. The combined company took the IGT name and is listed on the New York Stock Exchange, with De Agostini becoming the majority investor.
Shareholders appear comfortable with the changes at IGT, as the stock is higher by more than two percent in midday trading. At least one analyst is applauding the manner in which the company is handling the transition, noting it was “likely a planned and deliberate one.”
We also view the Board’s selection of Mr. Sadusky as prudent, given his 10+ years spent on IGT’s Board of Directors and ~15 years of CEO experience,” said Stifel’s Jeffrey Stantial in a note to clietns today. “We also expect his time spent navigating media companies into the modern digital landscape will prove useful as the global gambling industry shifts increasingly online/omni-channel.”
He recently initiated coverage of IGT with a “buy” rating and a $43 price target, which implies upside of 59 percent from the Jan. 19 close.
Lottery Love for IGT
With what appears to be a smooth CEO transition in place, IGT investors can focus on potential 2022 catalysts for the stock.
Those include the cash-generating lottery business, which Stantial previously argued doesn’t get enough credit in the investment community. He argued that’s because IGT is essentially structured as a gaming conglomerate, with multiple business lines. IGT’s lottery unit is one of the largest in the world, and drove nearly three-quarters of the company’s earnings before interest, taxes, depreciation and amortization (EBITDA) in 2019.
“We remain constructive on the shares into 2022, as we believe IGT’s lottery business remains fundamentally mis-priced, while a ~7x forward one-year EBITDA multiple also discounts an accelerating organic growth algorithm (online verticals, improving retail lottery penetration) and vastly improved balance sheet (3.5x YE21),” adds Stantial.
Another possible catalyst for IGT is the company’s newly created iGaming/sports betting unit. There’s speculation that unit could eventually be spun off to raise cash and unlock shareholder value.
Slots Can Contribute, Too
IGT is the manufacturer of the Wheel of Fortune slot machine, one of the most popular slots on casino floors across the US.
That’s a plus for the company, because with more operators focusing on high-margin gaming options, analysts are forecasting 15,000 more gaming machines will be sold this year, compared to 2021.
“While 1H22 comps are challenging on the lottery front, overall lottery demand remains robust, and our checks suggest casino purchasing behavior should improve in 2022,” said Stantial. “Coupled with favorable timing in the lottery capex cycle, FCF should be prolific for the next several years. All told, we believe this implies material potential upside in the shares, and reiterate our Buy rating and $43 target price.”
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