Jefferies Equity Research analyst Kai Erman took a wait-and-see attitude on slotmaker Light & Wonder in an investor note Wednesday, anticipating third-quarter commentary by management. But he said he “recently came away more convicted” following Global Gaming Expo, in Las Vegas.
Erman forecast AU$382 million in Light & Wonder third-quarter cash flow, lower than the market’s consensus of AU$386 million. But he expected earnings per share of AU$1.97, whereas the consensus view was AU$1.92. Erman called his changes “minimal” in nature.
Pointing to the pace of Lightwave Solar cabinet sales in the United States, Erman increased his expectations of both U.S. and international sales for L&W products. He also expressed confidence in the Cosmic Dual cabinet, given the success Down Under of the Rolling Drums and Big Steam games.
As for Light & Wonder’s underperforming SciPlay division, Erman cut his earnings estimates slightly. “Our SciPlay revenue growth forecasts sit below consensus, although slightly more in line,” he explained, “driven by our lower-revenue higher-margin SciPlay forecasts.”
Looking ahead to fourth quarter 2026, Erman anticipated strong key performance indicators, “supported by seasonality, market share gains, and improving content momentum.” He said Light & Wonder forecast sequential increases in slot-machine sales and for the Gaming Operations division to experience growth in the mid-single digits.
As for 2027, Erman expected premium-machine installations on the order of 500 per quarter. Revenue increases, he added, could be driven by gains in the sell-through of slots in the U.S., achieving 25-29 percent of market share in that category. Also potentially helpful would be the success of Cosmic Dual machines in Australia and New Zealand.
Erman said he remained optimistic that Light & Wonder could grow cash flow by as much as nine percent. But he added, “Recent share price weakness suggests the market is questioning [either] consensus earnings or their quality.”
Without newly acquired Grover Gaming, Erman continued, Light & Wonder revenue growth from January through June of 2026 had been less than one percent. Therefore, a speedup in revenue accumulation would be an important catalyst for the stock.
September’s Global Gaming Expo, Erman said, had bolstered his confidence in how deep Light & Wonder’s repertory of products was. However, that would be unlikely to manifest in the company’s performance in the third quarter.
But Erman expected increased revenue in the fourth quarter of 2026 and for 2027 to see revenue accumulation improve by around five percent. Reduced corporate debt, as well as making good on projections, would accentuate the stock price, he wrote.
Stock repurchases, though, appeared to be off the table. Erman expected none until the company’s debt burden stood at 2.5 times cash flow. It currently stands at or near 3.2 times cash flow, the analyst said.
Erman admitted to “limited visibility” with regard to stock buybacks. Still, he was of the opinion that debt reduction was the corporate priority, at least in the near term.
