Forget the flashy spin-off and merger with Everi. While analysts are busy dissecting the deal, they're overlooking a quieter story hidden within IGT's recent earnings call: the staggering performance of its Italian Lottery operations. This isn't just good news; it's potentially a gold mine that could fuel IGT's future and send the stock soaring.

What caught my eye wasn't the headline numbers, but the nuance of Vince Sadusky's words. He spoke of "continued growth in Italy, up mid-single-digits" for the first quarter of 2024, driven by "continued innovation and product launches." Then came the real kicker: "We think as those new launches moderate throughout the course of the quarter, we'll probably end up somewhere in low single-digit growth in the first quarter, in Italy."

Low single-digit growth might sound underwhelming, but consider the context. This comes *after* Italy delivered a nearly 7% same-store sales increase in 2023, a year already marked by exceptional growth. Essentially, IGT is predicting that even with a *slowdown* in new game releases, the Italian Lottery will continue to outperform.

Here's why this is a game-changer: Italy is the powerhouse of IGT's Global Lottery segment. In 2023, Global Lottery operating income was $913 million, meaning Italy likely contributed a significant chunk of that figure, potentially upwards of 50% or $456 million.

Now, let's play with some numbers. If Italy maintains even a conservative 3% growth rate throughout 2024, their contribution to operating income could surge to around $470 million. Apply that growth across the entire Global Lottery segment, and you're looking at a potential operating income of $940 million, a notable jump from the prior year.

Remember, this is the core business IGT will retain after the spin-off. A business that historically has been undervalued by the market. Now, imagine this scenario: IGT reports consistent quarterly growth fueled by Italy's strong performance. The narrative shifts from a spin-off story to a growth story.

Suddenly, investors wake up to the fact that they're holding shares of a company generating significant cash flow, with a recession-proof business model and operating in a sector that historically trades at much higher multiples. That 6 times EV-to-EBITDA multiple could quickly re-rate towards the 12-18 times range seen among lottery peers.

We're not just talking about incremental gains; we're talking about the potential for a doubling of the stock price.

The Italian Stallion is more than just a catchy metaphor. It's a testament to IGT's deep understanding of the Italian market, its ability to innovate, and its strong operational execution. While the market is fixated on the spin-off, astute investors will see the bigger picture. The real story, the one with the potential to rewrite IGT's future, is unfolding quietly in Italy.

Projected Growth of IGT's Global Lottery Operating Income

This chart illustrates the potential growth in operating income, driven by the continued strength of the Italian Lottery.

"Fun Fact: The Italian Lottery, known as "Lotto," has been around for centuries, with its roots dating back to the 16th century! Its enduring popularity speaks to the cultural significance of lottery games in Italy."