Time To Book Profits In Scientific Games Stock?

by Trefis Team
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Per the new strategic plan, Scientific Games (NASDAQ: SGMS) is targeting divestments in Lottery and Sports Betting businesses to lower its debt burden and improve margins. However, the company has $9 billion of long-term debt obligations on the balance sheet, which stands taller than the current market capitalization. Thus, Trefis believes that SGMS stock has low upside potential. In recent filings, the company highlighted the strong recovery of its Gaming segment from the lull observed in the past quarters. Also, the Digital segment continued to report better results assisted by rising sports betting wagers and the growing popularity of its major clients FanDuel and Wynn Resorts. While the company’s Q2 2021 revenues recovered to pre-pandemic levels observed in Q2 2019, the high-interest costs are a drag on operating cash flows. 

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 –0.3% 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 56.2% 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 5.3% compared to the S&P500 over the next 21 trading days, with a 53.7% 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,

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 3.9% 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 five 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 five 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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