After meeting with top management of Light & Wonder, Jefferies Equity Research analyst David Katz stuck by his Buy rating on LNW shares, which were trading at $110.82 at the time of Katz’s September 17 investor note.
Light & Wonder brass restated their belief that they could speed up business in time to hit their 2025 target of $1.4 billion in cash flow. “We believe the necessary growth drivers are in place to accelerate the business and to deliver solid execution,” opined Katz.
The analyst was sufficiently impressed by executives’ confidence that he raised his price target on Light & Wonder from $116 per share to $128. This was motivated by a single bulk order for games to an unspecified international jurisdiction, a sale that promised more unit movement, albeit at lower margins.
“We are also fine-tuning the ramp in the domestic installed base and increasing the international installed base,” Katz reported. He added that particular strength was manifesting in the Asian and Australian markets.
Potent slot machine sales aside, Katz found management primarily focused on the social-gaming sphere, where leadership “is spending considerable time stressing the opportunity set for social gaming, which is based on improved content and execution. In general, our impression is that the social gaming business is a driver of confidence in the 2025 guide.”
In terms of real-money igaming, Katz said that Light & Wonder is on course to benefit from what he described as improved game development strategies over time. He conceded that igaming has been slower to ramp up than anticipated, especially in the United States, where few jurisdictions have legalized it.
Concluded Katz, “The shares’ valuation is less relevant as with other higher value names with clearly defined trajectories vs. inexpensive stocks with less growth clarity.” He trimmed his revenue estimate for 2024 very slightly to $3.2 billion.
Katz’s cash-flow projection for 2024 remained essentially unchanged and his 2025 one rose a hundredth of a point.
