PHILADELPHIA (AP) -- Shares of Scientific Games Corp. fell Friday after an analyst downgraded the stock in part because he believes an Italian lottery joint venture isn't as lucrative as it first appeared.

J.P. Morgan analyst Carlo Santarelli downgraded Scientific Games to "Neutral" from "Overweight." The company makes machines for betting, instant lotteries and video gaming.

Scientific Games, in partnership with Italian gaming company Lottomatica SpA, is bidding for the chance to manage Italy's "Scratch & Win" instant ticket lottery. Italian press has reported that potential competitors have dropped out of the bidding process.

But Santarelli said the recent run-up in Scientific Games' shares shows that the market has "somewhat misinterpreted" the news of the joint venture.

"We believe there are nuances involved in the new deal, which ... leave the joint venture slightly worse off than what shares are currently reflecting," he said in a research note.

The analyst pointed to the 800 million euro upfront fee to be paid by both companies, of which 160 million euros would be shouldered by Scientific Games. This fee could hurt net income and lead to higher interest expenses for the two companies.

He also said that while the 3.9 percent concession fee to be collected by the companies is higher than what was expected, it won't greatly alter their profitability because of higher costs from suppliers.

Shares of New York-based Scientific Games fell $1.35, or 7.1 percent, to $17.80 in afternoon trading.