Sentiment Mixed on International Game Technology Ahead of Earnings


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Gaming equipment concern International Game Technology ( IGT ) is scheduled to release its quarterly earnings report after the close of trading tonight, with analysts looking for a profit of 19 cents per share. Comparatively, IGT earned 20 cents per share in the same period last year. Historically, the firm has matched the consensus estimate twice and bested expectations twice in the prior four reporting periods, resulting in an average upside surprise of 20%.

Sentiment is relatively bullish heading into the company's quarterly report. On the options front, speculative investors are rather optimistic. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.91 ranks in the 26th percentile of its annual range. This ratio has also trended lower during the past couple of sessions, dipping from its Oct. 30 perch at 0.93, in the 30th percentile.


Data from the International Securities Exchange (ISE) and Chicago Board Options Exchange ( CBOE ), however, hints at a rising preference for puts heading into IGT's quarterly report. The stock's 10-day ISE/CBOE put/call volume ratio of 3.05 reveals that puts bought to open have tripled calls purchased during the prior two weeks. This ratio also ranks above 80% of all those taken in the past year. Rising negativity ahead of an event typically signals low investor expectations.

Additional bearish sentiment can be found in the stock's short interest backdrop. Currently, nearly 5% of IGT's float is sold short, despite a decline of 7.6% during the past month. With short interest declining, a continuation of this short-covering trend could provide lift for the security.

Turning our attention toward the analyst community, we find that Wall Street is firmly entrenched in the bullish camp. According to Zacks , IGT has garnered 13 "buys," seven "holds," and only one "sell" rating. What's more, Thomson Reuters reports that the average 12-month price target for IGT rests at $19.43 per share, a premium of 19% to the stock's close at $16.35 per share on Monday.

Technically speaking, IGT has fallen more than 20% during the past 52 weeks. What's more, while the shares have rallied steadily along their 10-day moving average since late October, their 200-day trendline rests firmly overhead in the $17 region. This area also marks IGT's July peak, and could pose a significant technical hurdle.

Daily chart of IGT since May 2010 with 10-day and 200-day moving averages

In conclusion, the stock's current technical and sentiment backdrops do not offer up a best-case scenario for IGT bulls. While there is the potential for short covering, or even an unwinding of pessimism among options traders, IGT faces stiff overhead technical resistance, as well as the potential for analyst downgrades or price-target cuts. The bottom line is that unless the company beats expectations for the current quarter and guides higher, IGT may be left to trade sideways for the time being.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: CBOE , IGT

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