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Scientific Games Corp (NASDAQ: SGMS) has recently gone through a change in ownership and leadership, which offers prospects for value creation not seen in the last two decades, according to Jefferies.
The Scientific Games Analyst: David Katz upgraded Scientific Games from Hold to Buy, while raising the price target from $20 to $50.
The Scientific Games Thesis: On Sept. 14, MacAndrews & Forbes sold its 39% stake in Scientific Games to a group led by Caledonia, which suggests “a sea change in operating and stock performance,” Katz said.
“Some new business unit leaders are identified, but we expect more change throughout all levels. We expect the corporate cost structure to be refined with key focus on working capital and FCF,” he wrote in the note.
Although slots and equipment may not accelerate in the near term, given their lengthy product development cycles and the economic outlook, Lottery is likely to continue generating a 7% compounded annual growth rate between 2020 and 2022, the analyst said.
“The strongest growth, highest valuation, B2C social gaming and B2B iGaming and sports betting businesses should accelerate growth under new leadership, potentially beyond our 2019-22 CAGR of 12%," said Katz.
SGMS Price Action: Shares of Scientific Games Corp traded around $33.25 at the time of publication Monday.
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