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Short International Game Technology (IGT)

Aug 01 2008

Short International Game Technology (IGT)

The Casinos business has been under pressure for some time now with the US in a recession type environment and travel expenses escalating. Names such as Las Vegas Sands (LVS), MGM Mirage (MGM) and Wynn Resorts (WYNN) are grouped together as an industry having difficulty. MGM Mirage the weakest of the three with both declining revenue and earnings estimates.

The Supplier

            International Game Technology is a supplier of gaming machines, systems, parts, equipment and services. The stock has been growing as it replaces older technology with newer cashless systems in resorts across the country. But it’s recent quarter feel a little short and the companies chairman gave lowered guidance for the rest of 2008 and the beginning of 2009.

Falling Expectations

            The company during their most recent conference call lowered their earnings guidance from a range of 35-40 down to a range of 30-35. In addition to the poor guidance, the company is expected to see revenue decline year over year for the current quarter, the next quarter, and the current year. The company has missed two quarters in a row, so the lowered guidance could have been anticipated.

The Trade

            With the market being very volatile at this time, wait for a day when the whole market rallies to short the stock. Set a market stop 5% away from your purchase price and lower the stop daily if the stock moves down.

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