Stock buybacks are nice. They are a sign of confidence and they can boost earnings per share by reducing count. But they don't really change the fundamentals of a company. And a buyback is merely a commitment to repurchase stock. There's no guarantee a company will actually live up to its promise. That's why the more than 10% pop in slot machine maker IGT (IGT) seems like a bit of a stretch. (Although it's nice to see that CEO Patti Hart doesn't have the Yahoo (YHOO) CEO mess as a distraction anymore.)
IGT's trading at a little bit of a premium to rival WMS Industries (WMS) and a discount to Bally Technologies (BYI). So it's not overvalued. But the stock had been trading near a 52-week low for a reason. Analysts are predicting sluggish sales growth (about 8% this fiscal year and next) and there are concerns about casinos in general given the uncertain economic environment around the globe.
A stock buyback by IGT won't help the company all that much if firms like Wynn (WYNN) and Caesar Entertainment (CZR) are forced to slow down their investments on new slots and other gaming equipment. Wynn's stock is down nearly 10% year-to-date, and Caesar, which went public in February, is off more than 20% from its first day closing price.
Not a member yet?Sign up now for a free account
|Premarkets: 4 things to know before the open|
|You'll have to wait for your giant iPad ... but it'll be worth the wait|
|Losers! These 9 stocks totally missed the bull market|
|It's time to put a woman on the $20 bill|
|Federal Reserve says big banks could lose $490 billion in another recession|