Light & Wonder will undershoot cash-flow projections by one percent, according to Jefferies Equity Research analyst Kai Erman in a July 27 investor note. But that should not be investors’ focus, he argued.
Erman said the miss would be driven by the underperformance of SciPlay, Light & Wonder’s social-casino division, “which is well understood by investors. Commentary on SciPlay topline direction and cadence of outright sale timing should be result’s focus.”
The analyst said Light & Wonder management should stress game sales and the timing of game debuts, both of which he felt were on an upward trajectory. But lacking a considerable improvement on the social-casino front, high-single-digit improvement was unlikely.
For Light & Wonder overall, Erman predicted AU$363 million in cash flow. He thought SciPlay revenue would come in three percent below forecasts, “although publicly available data should see investors aware of headwinds in SciPlay/social markets.”
Light & Wonder’s recent reiteration of cash-flow guidance had, Erman said, sparked shares by eight percent. But he felt the market was still skeptical of Light & Wonder’s earnings guidance. In order to grow cash flow by as much as eight percent, he argued, Light & Wonder would have to increase it by 11 percent July through December, which Erman thought would be challenging in light of difficult comparisons and a lack of growth in the Australian and New Zealand markets until the fourth quarter.
Erman added, “The largest upside risk in our view is any recovery/stabilization of decline in SciPlay topline, which we do not foresee for at least 12-18 months.”
Light & Wonder needed, the analyst contended, is certainty about its earnings and a reduction in debt. Of the latter, “We do not expect to see a material change in views on leverage at this result, in the absence of commentary regarding share buybacks.”
As for firm earnings guidance, Erman felt cash-flow growth of nearly 10 percent was possible in 202, barring a repeat of 2026’s AU$70 million litigation settlement or another such one-time event. “However, we do not expect market concerns to be alleviated at the 2Q26 result,” he added.
Erman concluded, “We do see material upside to current levels. Even under the most conservative valuation scenarios, we struggle to reconcile LNW’s current valuation.”
