Scientific Games reported earnings last week. They were not good, but they were still important. One thing all should know about Scientific Games is that the price action of the stock over the last 5 years makes no sense at all. It jerks every which way incoherently, almost like a penny stock being manipulated by pump and dump scammers. I am not saying that this has actually happened and I am not making any accusations of impropriety. I’m just saying recent movements seem to resemble this. It’s totally bonkers.
To wit, shares rose 1,240% from February 2016 to May 2018, despite the company consistently losing money during that time and drowing in debt service, refinance costs, and other unproductive dead weight. We caught that weird nutty malignant bubble-tumor thing here and I recommended shorting it at $52 on January 23 that year. The position took about 6 months to mature but those who hung on did well. The stock eventually bottomed at $15 by the end of 2018, right around where it bottomed in March 2009. The shares have had a couple of dead cat bounces since then and are now floating atround $23. I don’t see any potential for another rally here and I can’t understand why anyone would buy this company, finances being a disaster train wreck. If it jumps back up to $50 or so for whatever reason, I guess we can short it again. That would be fun.
Scientific Games is levered 4:1 and I see no way out of the hole without a bankruptcy restructuring, if that will even be possible by the time it becomes necessary. I wouldn’t be surprised if the whole company is just liquidated in pieces in the end for lack of a buyer.
Back to last week’s earnings, they were pretty bad. EPS missed “consensus” by 71 cents and revenue missed by $32M. The “consensus” was at a positive 25 cents, and the quarter ended with a loss of 46 cents a share. Side note: The fact that anyone on Wall Street even takes consensus estimates on anything, seriously, is testament to the diseased culture of herded mob groupthink follow-the-leader investing where everyone chases everyone else around in circles like a bunch of poodles chasing one another’s tails and yapping high pitched barks about bull markets or whatever. They keep chasing faster and faster until they all get so dizzy and sick trading money around in the same bank circuits that they all fall over and throw up on themselves. Maybe that’s what happened when Scientific Games shot up to $63 for no apparent reason. The poodles got a bit too excited there I guess.