International Game Technology (IGT) is slated to unveil its latest innovations for the mobile interactive platform – IGT rgs Mobile at the upcoming European iGaming Congress and Expo 2012 (“EiG”). The 11th EiG will be held at Barcelona, Spain, on October 16, 2012.
Through its mobile remote game server, IGT rgs Mobile will enable operators to gain access to IGT’s mobile casino games. Moreover, IGT is planning to launch 20 games every year for the IGT rgs Mobile, thus giving operators an array of games to offer their customers. Currently, Betfred.com, Rank, Sky Vegas and Virgin Games are the operators who offer IGT mobile games.
Additionally, IGT through its interactive gaming segment is expected to release the mobile editions of its popular titles such as ELVIS A Little More Action, Kitty Glitter and Wolf Run. During the exhibition, IGT will also discuss its plans for the launch of personalized tablet games (Roulette and Blackjack).
We believe that IGT’s diversification in the mobile segment is a long-term positive strategy. According to market research firm BI Intelligence, the U.S. social gaming market (including mobile games) is expected to more than double from approximately $2.0 billion in 2011 to approximately $5.5 billion by 2015.
IGT is banking heavily on these interactive games to solidify its position in these fast-growing markets. In the last concluded quarter, IGT recorded 9.0% year-over-year top-line growth, primarily driven by strong performance of its interactive business.
We believe that the improving domestic gaming environment, international expansion opportunities and an impressive product portfolio will drive the company’s results going forward. Moreover, cost-cutting initiatives, new contract wins and strong growth from the interactive business will drive growth in the long term.
However, we believe that the increasing investment in product development will inflate operating costs, which will remain an overhang on the stock in the near term. There are other negatives as well, such as fewer new openings and increased competition from Bally Technologies Inc. (BYI) and WMS Industries Inc. (WMS) will keep the stock range bound. Sluggish replacement sales is another headwind 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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