Has Scientific Games Stock Reached The End Of Its Bull Run?

by Trefis Team
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The shares of Scientific Games (NASDAQ: SGMS) have been surging ahead in the past two months after the company reported strong growth of its Lottery, SciPlay, and Digital segments in the first quarter. With the reopening of conventional casinos and rising air travel demand in Q1, Scientific Games’ SciPlay and Digital segments observed 37%(y-o-y) growth in average revenue per user and 71%(y-o-y) growth in online wagering, respectively. Thus, investor optimism has led to a monumental rise in stock price since early May. On the contrary, the shares of prominent online casino companies Draft Kings and Penn National Gaming have been trending downward due to stiff competition in the sports betting industry. Notably, SGMS’ SciPlay and Digital segments also face tough competition from Zynga and International Game Technology, respectively. Moreover, the company’s Gaming segment, which contributes almost 50% of SGMS’ revenues and earnings, is likely to observe a demand crunch for a couple of years. 

According to the Trefis Machine Learning Engine, which identifies trends in a company’s historical stock price data, Scientific Games stock will likely gain 3.2% over the next one month (twenty-one trading days) considering the -0.2% drop in the past week (five trading days).

But how would these numbers change if you are interested in holding Scientific Games stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Scientific Games stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF SGMS stock moved by -5% over five trading days, THEN over the next twenty-one trading days, SGMS stock moves an average of 6.6 percent, with a 56.6% probability of a positive return over this period.

Also, given a -5% movement for the stock over 5 trading days, it has historically witnessed an excess return of 5.4% compared to the S&P500 over the next 21 trading days, with a 54.5% percent probability of a positive excess return

Some Fun Scenarios, FAQs & Making Sense of Scientific Games Stock Movements:

Question 1: Is the average return for Scientific Games stock higher after a drop?

Answer: Consider two situations,

Case 1: Scientific Games stock drops by -5% or more in a week

Case 2: Scientific Games stock rises by 5% or more in a week

Is the average return for Scientific Games stock higher over the subsequent month after Case 1 or Case 2?

SGMS stock fares better after Case 1, with an average return of 6.6% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 3.7% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Scientific Games stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Scientific Games stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For SGMS stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Scientific Games after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although SGMS stock appears to be an exception to this general observation.

SGMS’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Scientific Games stock by changing the inputs in the charts above.

Do shares of conventional casinos offer better gains ? Las  Vegas Sands Stock Comparison With Peers summarizes how LVS compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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