International Gaming Technology (IGT - Analyst Report) recently secured a deal from the casino-entertainment company Caesars Entertainment Corp. (CZR - Snapshot Report). Per the deal, IGT will supply 7,000 AVP Video Poker terminals to Caesars including 3,600 G20 Uprights, 2,400 Universal Slant cabinets and 1,000 G20 Bar Tops.
The new machines would be installed at Caesars Entertainment-operated resorts across the country and replace the earlier ones. In fact, this is considered to be the biggest gaming re-investment that the company has made in a decade.
This is a significant deal win for IGT. It not only strengthens the long-standing relationship between the two companies but also establishes IGT's credibility as a leader in providing reliable, user friendly interface to casino operators.
IGT has been a leader in the casino gaming segment. IGT’s DoubleDown Casino was the top grossing game on Facebook (FB - Analyst Report). It replaced Zynga’s (ZNGA - Snapshot Report) poker game to claim the top spot in the social casino game segment.
Moreover, the company also shipped 13,400 machines during the quarter compared with 11,600 units in the year-ago quarter. Average machine sales price was $13,300 versus $13,700 in the year-ago quarter primarily due to higher mix of low-priced VLT sales.
Moreover, as per a market research report published in “reportlinker.com”, the global casinos & gaming sector reported a total gross gaming win of $456.0 billion in 2012, representing a compound annual growth rate (CAGR) of 5.8% between 2008 and 2012.
To be more specific, Lotteries was the most lucrative segment in the sector in 2012, reporting gross gaming win of $142.2 billion, and contributing around 31.2% of the total value. The sector is expected to grow at an anticipated CAGR of 7.0% for the five-year period 2012 - 2017 and reach $641.0 billion by in the end of 2017.
We believe that IGT will benefit from new contract wins along with an improving domestic gaming environment, international expansion opportunities, an impressive product portfolio, lower dependence on the domestic machine replacement cycle and strong growth from the interactive business, going forward.
However, increasing investment in product development will increase operating costs, going forward. This will remain an overhang on the stock in the near term. Moreover, increased competition from its peers in its core as well as interactive markets will keep the stock range bound in the near term.
IGT Currently has a Zacks Rank#3 (Hold).