Bally: Better Grades After It Does The Homework?

Down From A Bounce
Bally Technologies (BYI ) has plenty going for it as the second-largest maker of slot and lottery machines. But a huge thorn is poking the stock: Bally hasn't reported quarterly financial results since the June, 2005, period. It faces delisting by the New York Stock Exchange unless it files the late reports by September. Little wonder that of 14 major analysts who follow it, four rate it a "sell," including Citigroup (C ) and JPMorgan Chase (JPM ), and six are "neutral." Yet three tag Bally a "buy," despite the regulatory troubles. They say sales are going well, and they expect the financial statements will be filed before the deadline. The stock will then perk up, says David Bain of investment firm Merriman Curhan Ford, one of those who rate it a buy. He puts the value of the stock, now at 15.75, at 20, based on Bally's turnaround and his earnings estimate of 34 cents a share for 2006 and 62 cents for 2007, vs. a 3 cents loss in 2005. Some pros also see Bally as potential buyout bait. Lawrence Haverty of Gabelli Asset Management, which owns shares, says the company's strong cash flow and solid products are likely to attract bigger gaming device makers.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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