Despite “several near-term overhangs” at Light & Wonder, Jefferies Equity Research analyst Kai Erman kept a Buy rating on the stock in a November 6 investor note. Light & Wonder ceases American trading on November 14.
Erman maintained a 25 percent discount on the stock price, citing ongoing litigation. But, “With operating fundamentals intact, we see upside from ongoing execution delivering a re-rate.” He also applauded Light & Wonder for its earnings trajectory and free cash flow.
The analyst was of the view that a strong third quarter “allays some concerns” about the slotmaker. He noted that operating momentum was better than usual and that Light & Wonder is standing by 2025 earnings guidance.
Erman also observed that $136 million in free cash flow funded $111 million in stock buybacks. He called this development “encouraging.”
“While buybacks are materially accretive at current levels, we expect management to prioritize repayment of debt from 1Q26 given investor appetite,” Erman added. He thought Light & Wonder was on the lookout for mergers or acquisitions, but said that the company ought to be precluded from executing any until its leverage is down to 2.5 cash flow.
The Jefferies boffin’s forecast for Light & Wonder was for $1.9 billion cash flow in 2028, propelled by gains in land-based market share. “Premium install-base growth and Grover [Gaming] opportunity will build a strong recurring-revenue base,” Erman added. “We are confident in execution in Gaming and Light & Wonder consolidating #2 position.”
Catalysts pointed up by Erman included Grover’s pending entry into Indiana charitable gambling, as well as a preponderance, to the tune of 80 percent — of premium slot machines in Light & Wonder’s product installations.
As for ongoing legal difficulties with Aristocrat Leisure, Erman expected the discovery process to wrap up in December, with evidence submitted in April. He allowed that the continuing uncertainty made it difficult to make the case for investing in Light & Wonder. But, he noted, a 40 percent decline in the company’s share price over the last 14 months implied that a worst-case scenario was already reflected in the stock, “although this may be difficult to realize with more clarity.”
Erman ended by predicting a litigation settlement with Aristocrat in late 2026. He pegged the likely amount at $200 million.
