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I think estimates for the first half of 2009 are probably too high for all of the gaming equipment suppliers, although IGT could save its way there. Revenue estimates look too aggressive as discussed in my post “CAPEX, COVENANTS, AND CORPORATE CONTROL”.
  • IGT could probably get away with a revenue miss since sentiment is already so low. The company guided down last week, but the general feeling is that there could be more downside. The fact that 12 analysts maintain hold or sell ratings on the stock versus only 5 with buys, is not helping sentiment either. The first chart details the ratings breakdown by company.

    WMS, on the other hand, is loved by the sell side. Of the 16 analysts that cover the stock, 14 have buy ratings. I've got to believe the optimism is reflected in the earnings estimates as well. Indeed, analysts are projecting 10% revenue growth in the face of likely Capex resets in 1H 2009 by the operators. I’ve already stated my opinion on that subject.

  • It looks like the analysts have been persuasive with the buy side. As shown in the second chart, WMS trades at a 35-45% premium to IGT and a whopping 65-75% premium to BYI. Despite the potential for a 1H revenue shortfall, BYI looks cheap at under 10x earnings.

    While I worry about the whole group, revenue shortfalls on cheap stocks are likely to be less damaging than for a more expensive one with higher ratings.