Wall Street Bets: Analysts take on Light & Wonder, New York sports betting, lodging

September 11, 2023 2:40 PM
Photo: CDC Gaming Reports
  • Rege Behe, CDC Gaming Reports
September 11, 2023 2:40 PM

Light & Wonder

Analysts paid close attention to Light & Wonder over the last week. Truist Securities analyst Barry Jonas said that his firm recently hosted Light & Wonder CEO Matt Wilson and Senior Vice President, Investor Relations Nick Zangari in New York.

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In a note, Jonas wrote “Following a robust second quarter beat (AEBITDA +14%/+15% to us/Street), we see continuing momentum across LNW’s businesses ahead of the SciPlay expected deal close in early fourth quarter. Management again reiterated its $1.4 billion 2025 AEBITDA target on the back of significant investment in R&D (attracting top game design talent); while highlighting its ASX listing, continued share repurchases and further natural deleverage. We increase our PT to $86 (from $78) on higher multiples, while our model is under review for 2025E. Reiterate Buy.”

Jefferies equity analyst David Katz also discussed Light & Wonder in a Sept. 10 note:  “Per our 9/7 NDR, management continues to build the Street’s confidence that it can continue accelerating the business to reach its 2025 target of $1.4B of AEBITDA. We believe the messaging has evolved from management to present greater detail on the necessary growth drivers toward 2025, which do not appear to be heroic, but rather require solid execution. Our expectation is that our estimates look at least secure, with an upward bias toward 2025. Increasing target to $88.”

New York sports betting

Commenting Sept. 8 on the New York Gaming Commission’s report on sports betting revenue for August ($98.5 million on a handle of $1.11 billion), J. P. Morgan analyst Joseph Greff noted that on a year-over-year basis, the handle was up 28% and revenues were down 1%.

“New York ascribes a 51% tax rate to gross gaming revenue, so after tax (but before promotions), market-wide net revenues were $50 million,” Greff wrote. “There was no disclosure on the level of promotions. Recall four operators – FanDuel, DraftKings, Caesars and Rush Street – launched online sports betting on 1/8/22, while BetMGM launched on 1/17/22, PointsBet on 1/24/22, WynnBET on 2/4/22, WorldBET (Resorts World) on 3/3/22, and BallyBet on 7/7/22. Recall that on June 20th, BallyBet temporarily shut down operations to transition its tech stack to Kambi.”

U.S. lodging trends

Focusing on lodging trends in the U.S., Truist Securities analyst C. Patrick Scholes in a Sept. 7 note wrote that strong midweek results before Labor Day presented “an encouraging sign as we move into the more seasonally heavy group/business travel season. These results are consistent to our analysis in our recent Lodging RevPAR (revenue per available room) Monitor.”

“As Labor Day fell on the same Monday for 2022 and 2023, we view last week as a clean comp excluding natural disasters (hurricanes and fires). Business travel demand was encouraging with Monday-Wednesday RevPAR averaging +6% year-over-year, whereas Sunday RevPAR was -0.1% and Friday/Saturday averaging -1%.

“Las Vegas had strong results (led by Group) with RevPAR averaging +46% year-over-year from Monday-Thursday.”