SGMS has recovered after the negative reaction to the results. Now it is trading close to those levels and it seems that the poor results have been brushed aside by the market. Zacks has maintained its neutral rating on the stock with a price target of $9. In the last quarter, the company lost $0.16 per share and the revenue of $219 million was less than the estimate of $227 million. This was a yoy decline of 5%, and a sequential decline of 12%. The company has been posting losses for some quarters now, and the sentiment is not very strong. The acquisition of WMS Industries may be good for the long term but the price paid for that has been questioned by many. The acquisition price of $26 was a 59% premium to the market price at that time. MGT Capital Investments (MGT) has filed a lawsuit against several casino gaming companies including WMS recently. The lawsuit has a potential award of $300 million to $4.5 billion (for all the defendants put together). Contingent risks related to that lawsuit and also the legal costs makes the acquisition price appear even higher. The $1.5 billion paid for the acquisition has increased the debt on books. Shareholders of WMS have approved the acquisition recently. Even WMS did not post a good set of numbers. The merger may be complete by the end of the year and now it is important that the all parts, including WMS start to perform better. The real impact of the acquisition will be apparent over the longer term, and a few good quarters can turn the sentiment in SGMS's favor. Of course, the high leverage will remain for some time to come. So improvement in operational performance will be the key to positive movement in the stock. Further, more information about the lawsuit will also be available in the next few months.
