Jefferies Equity Research analyst Kai Erman cautioned that Aristocrat Leisure’s “share-price underperformance, driven by a bearish consumer backdrop, is overdone in our view.” He expressed this view in an April 7 investor note.
Noting that checks with consumers and competitors were very positive, Erman expressed continued confidence in Aristocrat and reiterated a Buy rating on its stock. He added that its price-to-earnings ratio of 19 times represented a discount.
Erman conceded that fears of adverse United States consumer activity had caused Aristocrat to underperform on the stock exchanges. He noted less interstate travel, due to wet weather, but said that casino-operator comments “reflect positive intentions for forward orders and capex.” He expected no more than a three percent trough in gambling revenue, consumer fears notwithstanding.
Observing “materially strong” performance by Aristocrat’s Phoenix Link and Baron Cabinet games, Erman predicted 5,300 installations in the latter half of 2025. That was, however, down from 5,600, due to slightly weaker economic expectations. “We expect the slot subsector to remain resilient to these consumer fears, as indicated historically,” insisted Erman.
He also projected five percent growth in Aristocrat’s social-casino business. “Whilst social casino markets have been ex-growth for some time, [Aristocrat] has demonstrated significant above market growth,” he wrote. “We are confident in [Aristocrat’s] execution in Product Madness in the face of a slowdown in market activity given market share delivery to date.”
Erman also refuted the idea that igaming activity had occasioned any cannibalization of land-based gambling. He pointed out that the three largest operators were seeing as much as 25 percent growth year over year.
“Earnings,” Erman argued, “are arguably less important than demonstration of momentum toward longer-term Interactive targets and slightly slower content roll-out should not dampen sentiment given long term opportunity.”
The analyst saw three growth opportunities for Aristocrat via mergers or acquisitions. He pointed to adjacent markets in the U.S., geographical expansion in Europe and/or Latin America, and to igaming technical acquisitions.
Erman seemed particularly interested in U.S. growth possibilities. He underlined Aristocrat’s strong performance in coin-operated amusement machines in Georgia, as well as the growth opportunity highlighted by Light & Wonder’s competing purchase of a charitable-gambling operator.
“Underperformance over the past month on consumer and tariff fears are overdone in our view,” Erman concluded. Aristocrat, he penned, “represents an appealing valuation for a best-in-class franchise exposed to a relatively resilient subsector with appealing industry dynamics.”
