Downgrades are coming to Light & Wonder, due to recent weakness in its SciPlay subsidiary. That was among the findings of Jefferies Equity Research analyst Kai Erman, as expressed in a July 9 investor note.
Erman reported a five percent to eight percent decline in SciPlay-derived revenue for 2026, leading to a two percent cut in cash flow. He also postponed the effect of Australian and New Zealand slot machine sales into the fourth quarter of the year.
However, Erman said that Light & Wonder was maintaining United States market share despite outperformance by Aristocrat Leisure. Although Aristocrat was taking share with its Monopoly and Spooky Link Grand games, it wasn’t coming at Light & Wonder’s expense.
Other than Light & Wonder and Aristocrat, Erman indicated, there were “minimal” leased games in the market. He was also optimistic that Light & Wonder’s game releases in the latter half of 2026 would grow the leased contingent.
“More muted” was the debut in the Antipodes of game Cosmic Dual, according to Erman. “Jin Chan performance has been weaker than expected, according to our recent New South Wales club checks,” he added.
However, Light & Wonder was said to have a potent lineup of games coming to market, with a planned launch of one marquee title or franchise per quarter on new cabinets. Erman expected that to fill any lacunae in content, particularly in the fourth quarter of 2026.
Even so, Erman was pessimistic about the chances for a substantial pickup in cash flow, barring growth in Australia and New Zealand sales and/or a resurgence in the social-gaming sphere. “We have limited confidence in SciPlay recovery,” he added, forecasting an eight percent drop in revenue.
Erman projected 4.5 percent cash-flow growth for Light & Wonder overall. He also felt it was possible for the company to capture as much as 30 percent of the Down Under marketplace, dependent upon game releases in late 2026 and early 2027.
Light & Wonder ended the second quarter with AU$26 million in share repurchases, an increase from the first quarter’s AU$22 million. “We believe clearer guidance on future buybacks is needed to support investor confidence,” Erman opined.
The company was on track for AU$200 million in repurchases in 2026, according to Erman, who felt this would slow leverage reduction until the third quarter of 2027. “In our view, achieving this target would require either stronger cash conversion than we forecast or a pause in buybacks.”
In conclusion, Erman reiterated a Buy rating on Light & Wonder shares, with a price target of AU$145 per share. It was trading at AU$107.85 at the time of Erman’s report. He observed that the market was unlikely to reward price growth driven primarily by share buybacks, however.
Ending on a positive note, Erman penned, “Despite near-term risks and headwinds, we cannot stack up current valuation, and believe the disconnect in the share price and fair value provides a compelling risk/reward trade-off with patience.”
