International Game Technology (IGT) is portrayed as a misunderstood, cash-generative business with durable assets and compelling upside. Following years of strategic ambiguity and market distrust—especially around its gaming segment—IGT is now undergoing a major simplification: divesting its slot machine business to Apollo, using proceeds to reduce debt and help finance a large Italian lottery contract renewal. While the upfront payment for the contract exceeded expectations, management projects an 11.8% IRR, and the base lottery business continues to deliver stable, annuity-like cash flows with GDP+ growth rates.
Investors appear to be overly focused on near-term accounting noise and legacy complexity. Trailing GAAP numbers obscure the underlying $500M+ free cash flow potential, and the current valuation—about 5.8x normalized FCF—implies a declining business. In reality, IGT holds a leading market position in the global lottery industry, supported by high switching costs, multi-year contracts, and moderate barriers to entry. If cash flows normalize and strategic clarity is restored, the stock offers 2x+ upside over five years, even without a multiple re-rating. Key risks include capital misallocation, lottery underperformance, or future contract overpayments.
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