One stock that happened to be one of the biggest losers on Wednesday’s market was a company that likely few investors would have heard before unless you’re actively following the industry. Scientific Games (NASDAQ: SGMS) is one of the bigger gambling stocks on the market, responsible for providing games and lottery services for a number of different venues, as well as its own digital products. While it’s a stock that often doesn’t get a lot of coverage, the company saw its shares fall almost 20% on Wednesday after reporting its quarterly results.
Scientific Games stated that fourth-quarter revenues came in at $863 million, which is a little bi below the $886 million reported in the previous year. While it’s disappointing that revenues have gone done for the company, it’s actually slightly above what was expected by Wall Street. The biggest decline, however, came from the company’s profits. Whereas Scientific Gaming had reported $207 million in income for the previous year, the most recent quarter saw the company report a shocking $37 million net loss. Although the company still has $313 million in cash, almost double the $168 million from last year, and enough financing to last it quite some time, investors were rightfully surprised to see Scientific Gaming report this net loss.
Despite this, management tried its best to present the company’s long-term picture in the best light. This includes emphasizing the fact that Scientific Gaming has been paying off its debts, something that otherwise would be seen as a good move by investors if the company’s other financial metrics weren’t so glaring.
“We reduced our net debt by over $460 million in 2019, while successfully completing two refinancing transactions that will significantly reduce our cash interest costs going forward and extended our maturities. Our overarching commitment remains [delivering] through organic growth, new market opportunities, and driving further enhancements to our free cash flow,” said CFO Michael Quartieri in a conference call with analysts.
Shares of Scientific Gaming fell by 18.4% on Wednesday in response to the news. Most analysts covering the stock remain quite neutral on the company’s prospects. Six out of 11 Wall Street analysts have a neutral “hold” rating, compared to the four “buys” and just one “sell.” Over the past six months, shares of Scientific Games have gained a fair bit of value, although they are still below their record highs back in 2018. Time will tell whether the company will do well in the long term now that it’s paying off its debts, but the short-term prognosis on this gambling giant doesn’t seem that optimistic.
Scientific Games Company Profile
Scientific Games Corp is a provider of gaming products, systems, and services to the lottery and pari-mutuel industries. The firm is the producer of instant lotto tickets and prepaid phone cards, which make up more than 52% of sales. The firm also provides wagering systems, server-based gaming machines, and data communication services through its lottery systems and diversified gaming businesses. About 50% of instant lotto tickets are sold outside the United States. It has Gaming, Lottery and Interactive segments. – Warrior Trading News
