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IGT Debuts in Pennsylvania

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International Game Technology (IGT - Free Report) marked its debut in the state of Pennsylvania as it provided 40 server-based gaming slots to The Meadows Racetrack and Casino, owned by Cannery Casino Resorts.

IGT’s diversified gaming portfolio lets The Meadows Racetrack and Casino enhance its entertainment value and attract new clients. Moreover, The Meadows Racetrack and Casino’s brand value gets a boost as it will be the first casino in Pennsylvania to offer IGT’s server-based games.

As for IGT, venturing into Pennsylvania expands its footprint to a relatively new market. IGT’s casino gaming solutions are cost effective and improves Casino’s bottom line. IGT’s business is also likely to benefit as more casinos in Pennsylvania start installing IGT’s popular server-based games to attract clients.

Separately, IGT has been making headway with its DoubleDown Casino online interactive games. Recently, IGT had secured its first land-based deal in Las Vegas as it entered into a partnership with Hard Rock Hotel and Casino. IGT had also secured a similar deal with Jacobs Entertainment last month.

We believe that these new contract wins and international expansion opportunities, an impressive product portfolio, reduced dependence on the domestic machine replacement cycle and strong growth from the interactive business will likely drive IGT’s growth going forward. Moreover, an improvement in the domestic gaming environment would prove to be a positive catalyst for the company going forward.

Additionally, IGT is keeping pace with the technology demands of the day and has made headway with its IGT Cloud. We expect the IGT Cloud services to gain traction in the casino gaming industry, as it is expected to be well received by new casino properties, thereby improving the company’s top line.

However, we believe that the increasing investment in product development will drive operating costs, which will remain an overhang on the stock in the near term. Moreover, fewer new openings and increased competition from Bally Technologies Inc. and WMS Industries Inc. (WMS - Free Report) will keep the stock range bound in the near term.

We have a Neutral recommendation on the stock over the long term (6-12 months). Currently, IGT carries a Zacks #3 Rank, which implies a Hold rating in the short term.

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