Brightstar Lottery’s strategic moves offer a moderate upside in the online gambling market. Jefferies Equity Research analyst David Katz initiated coverage on July 7, placing a Hold rating with a price target of $19 per share. At that time, Brightstar’s stock stood at $18 per share.
Katz expressed that Brightstar Lottery’s strategic moves, such as the recent asset sale to Apollo Management, share repurchases, and a new lottery contract in Italy, have yet to deliver the expected value. He emphasized that despite these developments, Brightstar offers less upside compared to its peers in the gambling sector.
Brightstar Lottery’s Strategic Moves in Asset Sales
The analyst highlighted two key events shaping Brightstar’s course. The first was the $4 billion sale of its gaming-machine business to Apollo, merged with Everi Holdings. Katz regarded this as a positive move, foreseeing significant capital returns and a reduced debt profile.
The second significant event involved the successful rebid of the Italian lottery contract. However, the renewal came at a substantial cost of €2.2 billion, surpassing the prior fee of approximately €1 billion and initial expectations of €1.5-1.7 billion, affecting capital returns.
$2 billion from these developments will focus on decreasing Brightstar’s debt, leading to a reduced leverage of 3.1 times cash flow. The Italian concession fee will be split into three payments: $550 million upfront, $330 million in Q4 2025, and the remaining $1.5 billion by Q2 2026.
The Impact of Share Buybacks and Debt Reduction
Capital returns are planned in two forms, totaling $1.1 billion. Brightstar Lottery’s strategic moves include repurchasing shares at $75 million per quarter over six quarters, alongside a $3-per-share special dividend for shareholders. Katz sees potential in ongoing share repurchase programs, which he believes could enhance valuation over time.
Despite Katz’s approval of debt retirement and buybacks, he expressed concerns about the Italian contract’s costs, its possible influence on other lottery agreements, and mounting competition. Addressing these areas should be Brightstar’s top priority.
Brightstar faces a balance of factors influencing its potential. While there is promise, tackling these challenges will dictate its future success. Read more news.
