On Wednesday, Jefferies adjusted its outlook on International Game Technology (NYSE:IGT), reducing the stock's price target to $26.00 from the previous $30.00 while retaining a Hold rating on the shares.
The adjustment followed IGT's trading activity, which saw a decline during Wednesday's session despite a reported 2% beat in Q4 adjusted EBITDA. The reduced price target stems from several factors that could affect the company's stock performance in the near term.
Analysts pointed to a slight downward trend in Global Lottery estimates, which was indicated by same-store sales growth and operating income margin guidance. Additionally, there were concerns regarding the expected upfront payments associated with the Lotto contract process.
Another contributing factor was the ongoing investor confusion and frustration regarding the tax structure for the pending spin-off of IGT's Global Gaming and PlayDigital businesses.
Jefferies noted that while the long-term prospects for IGT remain promising, particularly as a standalone lottery business potentially receiving a more fitting valuation, the current sentiment suggests that the stock might not see significant movement until the completion of the spin-off deal. The uncertainty surrounding the tax implications and the Lotto renewal process could keep shares within a certain trading range for the time being.
Following these considerations, Jefferies also revised its financial model for IGT, reducing the forecasted adjusted EBITDA by 4% for fiscal year 2024 and by 5% for fiscal year 2025. This revision aligns with the newly set price target of $26.00 and reflects the firm's cautious stance on the stock in light of the identified challenges and uncertainties.
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