In a January 12 accord, Light & Wonder agreed to pay Aristocrat Leisure $127.5 million to cover legal fees and settle an intellectual-property lawsuit. Jefferies Equity Research analyst Kai Erman called it “a positive outcome” for Light & Wonder.
According to Erman, Light & Wonder admitted to misappropriation and infringement of Aristocrat intellectual property relating to Dragon Train and Jewel of the Dragon. Both Light & Wonder games have been removed from the market.
Light & Wonder allowed that Aristocrat arithmetic was used in the development of the two discontinued games. Wrote Erman, the former “has agreed to permanently cease commercialization of these games globally and make best effort to remove existing installations, consistent again with its previous approach.”
The agreement also covers unspecified Light & Wonder games currently in development. “Our understanding is that this does not apply to existing games (i.e., limited contagion risk from here),” Erman added. The analyst, who had expected a settlement on the order of $200 million, opined that the settlement would result in minimal risk to Light & Wonder’s operations or earnings.
Erman had anticipated a substantial price-to-earnings impact on Light & Wonder from the litigation. However, the market’s fears for the Light & Wonder balance sheet should abate, he wrote, given the apparent lack of forward-looking risks.
Accordingly, Erman rescinded a discount on Light & Wonder shares, stating a target price of AU$225 per share. He added, “We see no reason for Light & Wonder to trade at a discount to the market as the stock deleverages over FY26/7.”
The Jefferies analyst concluded that, in light of the modestly positive news and the removal of a pending lawsuit, Light & Wonder stock should receive still more upward revision.
