In the wake of Light & Wonder’s fourth-quarter earnings, Jefferies Equity Research analyst Kai Erman allowed that the data “reflects significant land-based momentum. It was always going to be a noisy quarter given the Dragon Train impact; however, [Light & Wonder] clearly continued share gain trajectory in the quarter.”
Even so, Erman remained bullish on Aristocrat Leisure. He wrote that he was confident Aristocrat was gaining market share, predicting the shipment of up to 5,800 leased-game units this year. His projection is 10 percent higher than market consensus.
Looking at medium-term growth prospects for Aristocrat, Erman wrote that they’re underpinned by “material share gains” and delivery of gaming products. While he conceded that Light & Wonder’s numbers were “ahead of ours and market expectations,” especially in light of the forced withdrawal of Dragon Train, this didn’t dim his enthusiasm for Aristocrat.
Erman said he anticipates Aristocrat’s Phoenix Link game and its Baron cabinet — plus such games as Dollar Storm, Dragon Link and Buffalo — to propel nearly 6,000 leased-unit installations this year. He added that he sees no reason to change his views on Aristocrat, even in light of Light & Wonder’s 37 percent market share.
The Jefferies analyst didn’t enjoy as much clarity regarding the market share of Aristocrat’s for-sale units. He pointed to an Eilers report that Light & Wonder held a 26 percent market share of newly shipped games, compared to 20 percent each for Aristocrat and International Game Technology.
Erman noted that this constituted a slight downturn for Aristocrat, attributable to a weaker performance by tribal casinos in the U.S., “as well as slight share leakage.” Aristocrat has traditionally held a larger market share in the tribal sector.
However, Erman observed, on the strength of the preponderance of Aristocrat revenues derived from leased games, along with “material share gains,” the softness in for-sale games is more than mitigated by gaming-operations business.
In social casinos, Aristocrat is continuing to agglomerate market share, growing six times as fast as Light & Wonder, Erman observed. He continued that the latter’s “strength in market share as well as improving monetization and engagement” ought not to blunt Aristocrat’s impact in the social-casino sphere.
Citing recent changes at the Product Madness unit (formerly known as Pixel United), Erman said, “Igaming share is more opaque to measure.” Even so, on account of Aristocrat’s relative newness to igaming, “We would expect LNW’s execution and momentum to have minimal impact.”
Erman closed by saying that his AU$85 price target per share for Aristocrat stock remained justifiable, due to current share gains by the company. Doubts about the sustainability of Aristocrat’s market share “are natural given market leadership position, and heightened when key competitors are taking material share and executing.”
But Erman stayed buoyant on Aristocrat’s next year to 18 months, on account of the performance of its new games. “Industry leading investment into new product pipeline supports [Aristocrat’s] ability to defend market position, and given corporate activity occurring with competitors, we see a strong runway for share growth for both” companies, he wrote.
