Jefferies Equity Research analyst Kai Erman put a Buy rating on Aristocrat Leisure, citing the strength of its social-casino products, in a December 4 investor note. Erman wrote that the company “continues to outperform and take share off the broader market significantly.”
Factors adding to Erman’s optimism were Aristocrat’s sale of its Plarium mobile-gaming arm to Modern Times Group (for $820 million) and impending sale of Big Fish Games. He opined that this would make Aristocrat’s social-gaming growth clearer, with considerable potential for further gains in market share.
The Jefferies report pegged Aristocrat’s share of the social-gaming sphere at 15 percent, compared to the 11 percent held by Light & Wonder’s SciPlay division. After the subtraction of Big Fish and Plarium, social casinos represent 3.9 percent of Aristocrat revenue and “continues to make share gains, which we expect is driven by differentiated and leading content.”
Erman’s data showed Aristocrat outpacing both Light & Wonder and Playtika in third-quarter growth of gross gaming revenue. Aristocrat was at eight percent growth versus Light & Wonder’s six percent and Playtika’s flat trajectory.
Although Playtika remains the leader in social-casino market share, Erman wrote, “This gap continues to narrow.” The analyst saw further Aristocrat outperformance forthcoming, “given improving ability to leverage content between land-based/digital gaming forms.” He called the Big Fish and Plarium sales “sensible,” pointing to growth in interactive gambling.
Hailing Aristocrat’s continued social-casino growth, Erman predicted it could deliver three percent to four percent in gains in an otherwise flat market. He noted that social gambling could increase Aristocrat’s margins, due to high brand recognition, synergies with land-based games, and therefore, lower marketing costs.
