Gaming stocks have gotten blasted since WMS reported their fiscal Q4 on 8/5/08. WMS is no exception, down 37% in almost 3 months. The suppliers have actually outperformed their operating brethren, if I can take the liberty of using the term “outperform” for such a dismal performance.
The world has changed. The credit crisis has hammered the sector. WMS is in great shape financially but its customers are not. That is a problem. I fully expect management to capitalize on the opportunity to lower guidance.
I think it is instructive to keep in mind what was said in the prior quarter’s release and conference call. To make it easy to examine the sequential change in management’s tone, I’ve put together a table detailing fiscal 2009 and Q1 guidance. I’ve also YouTubed some important metrics discussed last quarter in preparation for Monday.
• Open orders for new gaming machines and platform conversion kits totaled more than 11,700, which represents 40% of expected fiscal 09 unit volume guidance and is 700 units ahead of last yr's compare
• Average selling price guidance for fiscal 09 represents a 3-8% increase over realized results in 4FQ-08.
• They expect to continue to charge for the value-add in their products, contrary to the belief that discounting runs rampant
• Typical revenue breakdown: Q1 20-21%, Q2 23-25, Q3 25-27%, Q4 28-30%
In addition to revised guidance, the open order metric will be critical to understanding underlying demand vs. last year but also to gauge the conservatism in management’s guidance. For example, open orders exceeding 40% of next 12 month expected demand could be indicative of conservative guidance. Hopefully, that will be the case.
Fiscal 2009 guidance given last quarter