On Monday, Stifel analysts adjusted their outlook on shares of International Game Technology (NYSE:IGT), reducing the price target from $30.00 to $26.00. Despite the lowered target, they have maintained a Buy rating on the stock. The analysts highlighted IGT as one of their top four ideas for 2025 among companies with a market capitalization greater than $2 billion, which also includes WYNN, NCLH, and FUN.
The rationale behind IGT's inclusion is largely event-driven, hinging on the expected sale of its Gaming & Digital business to Apollo for $4.05 billion in cash. This transaction is anticipated to be completed by the end of the third quarter of 2025.
Post-sale, Stifel anticipates that the remaining lottery-focused segment of IGT (RemainCo) will experience a positive re-rating. The analysts project this due to the segment's infrastructure-like attributes that have been previously overshadowed by the more cyclical and hit-driven nature of IGT's Gaming business.
These attributes include long-term government contracts, recession-resistant and predictable cash flows, and high barriers to entry such as research and development intensity and government risk aversion.
The analysts note that peers in the lottery space are currently trading at multiples ranging from 10 to 25 times their estimated 2025 free cash flow (FCF), with past transactions supporting similar valuations. The new $26 price target is based on an 8.5 times multiple of the projected 2026 Adjusted EBITDA for the Global Lottery RemainCo.
This assessment has been adjusted to account for several factors: the $3.65 billion in net proceeds expected from the Apollo sale, minority interests valued with a 'lack of control' discount, and IGT's share of an anticipated Lotto upfront license fee, which is assumed to be €1.1 billion for the time being.
Analysts have chosen to value IGT on its projected 2026 figures to normalize for separation costs that are likely to impact Adjusted EBITDA in 2024 and 2025. The target price has been discounted back 1.25 years at a 9% discount rate to reflect the time value of money and the anticipated timing of the cash flows.
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