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.
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.
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 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.