Financial services firm Morningstar has raised its economic moat rating for Australian slot machine giant Aristocrat from narrow to wide and increased the company’s fair value estimate from AU$52 to AU$65 due to its growing dominance of the US slots market.
The economic moat rating is applied as a way of evaluating how durable and defensible a company’s competitive advantages are, insinuating that – much like a medieval castle – a wide moat makes it harder for competitors to attack or erode its profits.
In a research note, Morningstar’s Angus Hewitt observed that the number Aristocrat’s North American leased electronic gaming machines (EGMs) has in the five years since March 2020 increased by 51% to around 74,000 units, while rival Light & Wonder’s units have grown by a more modest 13% over the same period and IGT’s has marginally declined.
