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IGT Wins New Deal in Nevada

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International Game Technology’s (IGT - Free Report) DoubleDown Casino secured a land-based deal with Bonanza Casino in Reno, Nevada. IGT will provide DoubleDown’s portfolio of online casino-style games to be played on the hotel’s website.

The partnership with IGT is expected to enhance Bonanza Casino’s entertainment value, since players can stay attached to the casino virtually. DoubleDown would be providing online games such as Da Vinci Diamonds, Cleopatra slots, multi-player poker and the new Bingo game. More exciting games will be added to its offerings over the next few months.

This deal is similar to a recent one with Hard Rock Hotel and Casino and with Jacobs Entertainment that was signed last month. Other than these deals, IGT’s DoubleDown Casino has secured revenue sharing partnerships with other casinos as well. The popularity of the DoubleDown platform is encouraging, enabling IGT to generate incremental revenue in the long run.

Though IGT is a comparatively new entrant in the online social gaming market, we believe that DoubleDown’s strong product portfolio and customer base will help it garner new partnerships that would provide a competitive edge over other established players.

New contract wins along with an improving domestic gaming environment, international expansion opportunities, an impressive product portfolio, reduced dependence on the domestic machine replacement cycle and strong growth from the interactive business will drive growth going forward.

Moreover, IGT recently ventured into Pennsylvania by providing 40 server-based gaming slots to The Meadows Racetrack and Casino. This would expand IGT’s reach in a relatively new market. IGT’s business is also likely to benefit as more casinos in Pennsylvania start installing IGT’s popular server-based games to attract clients.

Additionally, the company is keeping pace with technology demands 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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