Banc of America raised its investment recommendation on Shuffle Master (SHFL ) to buy from neutral on Wednesday, citing more confidence in the gaming equipment maker's earnings outlook.
Analyst David Vas said the stock is down in value by 17% from its July highs on earnings concerns that haven't materialized. Said that Shuffle Master's core business of making automatic card shufflers for casinos appears healthy, while newer products like Easy Chipper and Table Master are showing signs of traction. Given the company's intellectual property and pricing power, Vas thinks that an earnings per share growth rate of 25%, with the stock at 22.5 times his 2006 estimate looks reasonable. He sees the risk of an eventual slowdown in the company's core shuffler market, however. Vas raised his fiscal year 2005 (ending Oct) earnings per share estimate to 82 cents from 80 cents, and his fiscal year 2006 estimate to $1.04 from $1.00.