ONE IN THE HAND IS WORTH TWO IN THE BUSH

Investors have embraced the idea that 2010 replacements will accelerate. That may happen materially, modestly, or not at all. What will happen is slot sales to new/expanded casinos will be down big time.


 

We are optimistic about a potential acceleration in 2010 North American replacement demand.  The industry is going to need it.  Our database of new and expanded casinos shows that slot sales into these properties will decline 33% in 2010.  Since both replacements and new/expansion slots should each total around 35,000 units this year, replacements need to grow more than 33% for industry unit sales to increase next year.

 

 

 

Replacements are a wild card while new/expansions are fairly predictable and easy to calculate, if one does the work.  We do and we can say that 2010 will be choppy with positive growth by no means certain.  Challenge your favorite analyst to back up his/her 2010 growth slot forecast.  On a quarterly basis, Q1 2010 will be the ugliest with new/expanded units down almost 70%.  The only growth quarter will be Q3, up 93%.  We project Q2 and Q4 to decline 21% and 49%, respectively. 

 

 

ONE IN THE HAND IS WORTH TWO IN THE BUSH - domestic slot shipments new expanded

 

 

We don’t want to sound overly negative.  The space looks attractive long term given the normalization of replacement demand and the likelihood of significant growth in new markets.  Coming out of G2E, the sentiment was pretty positive (new markets, content) but we just want investors to be aware of the potential for some choppy results and earnings misses.  IGT could be at particular risk given its reliance on slot sales and a plethora of new “wheel” products from BYI.  We are less concerned with BYI’s earnings visibility due to a significant amount of deferred revenue, continued market share gains in systems, and the company’s ability to manage earnings.

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more