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Why Scientific Games' Shares Dropped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Scientific Games (NASDAQ: SGMS  ) dropped 10% today after being downgraded by an analyst.

So what: Deutsche Bank downgraded the stock from hold to sell and lowered its price target to $6, still $2.50 below today's price. The analyst pointed to risks in the company's business model and with its buyout of WMS Industries (UNKNOWN: WMS.DL  ) .

Now what: We Fools don't take Wall Street ratings too seriously, because stocks can pop or drop short-term on an upgrade or downgrade, but few investors remember a rating long-term. But in this case, I have to agree with the sell rating. Swallowing a company bigger than you is risky, especially when your core business isn't doing very well. I'd stay away from the stock and at least let the merged companies reach steady state before thinking about buying in again.

Interested in more info on Scientific Games? Add it to your watchlist by clicking here.

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Related Tickers

8/29/2016 1:43 PM
SGMS $8.44 Up +0.05 +0.60%
Scientific Games CAPS Rating: *
WMS.DL $25.29 Up +0.25 +0.00%
WMS Industries CAPS Rating: ***