A Bank of America analyst on Monday downgraded Scientific Games Corp., which sells instant lottery tickets to more than 50 countries, saying that he was bearish on growth expectations in Germany.
Analyst David Vas downgraded the stock to "Neutral" from "Buy," and lowered his price target by $5 to $31.
Vas said that instant ticket sales from two cooperative contracts in Germany have been sluggish due to legislative issues hindering the company's distribution and advertisement of scratch-off game cards.
"Without changes in the law, German co-op service revenues will likely disappoint in 2007," he wrote.
In the note, Vas wrote that in March the German Federal Consitutional Court ruled that state lotteries had a responsibility to prevent gaming addiction and protect youth from the games. As a result, state lotteries would have to decrease the number of points of sale (from the current 26,000) and stop advertising.
"Without new points of sale or advertising, our lottery contacts believe an Italy-like ramp is simply not possible," he wrote.
Shares of Scientific Games have shed 21 percent in the past three months, and 31 percent since hitting a 52-week high of $40.63 on May 10. The stock closed at $28.03 Friday on the Nasdaq.
Vas, however, remained upbeat on the industry, calling WMS Industries Inc., a manufacturer of gaming and video lottery machines, his "top pick."
"Global growth of instant tickets remains a compelling story," Vas said.
With the downgrade, it's going to be a while for company to be upgraded to buy for a while. What other companies analyze this company Todd? This is a good story.
With the downgrade, it's going to be a while for company to be upgraded to buy for a while. What other companies analyze this company Todd? This is a good story.
This is from the Yahoo! message board for SGMS.
For some time, SGMS has been a darling of the street. Now, some of the birds are coming home to roost