Deutsche Bank notes that Light & Wonder‘s 2025 $1.4 billion adjusted EBITDA target will be a challenging task, as their forecast indicates the figure is ‘well below’ the goals articulated by management.
In an investment memo issued right after the company announced the first-quarter results, Deutsche Bank indicates that ‘from a big picture perspective, we see Light & Wonder’s shares as fully valued.’
‘We view the current multiple as somewhat expensive, in light of the sum of the parts and what we believe is likely to be decelerating growth,’ note the analysts.
Further, in 1Q24, Light & Wonder grew adjusted EBITDA by 13 percent year-over-year. ‘To achieve the $1.4 billion target, growth would have to average 12 percent per quarter over the next 7 quarters, a modest deceleration from current levels, despite what is likely to be a situation involving more scrutiny on domestic operator spend levels and slowing slot GGR trends and participation yields,’ they opine.
Analysts note that the casino equipment and online games provider has done a nice job ramping up its international business, ‘as evidenced in the 1Q24, (they) should be taking share of a smaller pie domestically given new releases, and has several adjacencies into which they will begin selling gaming products, all of which argue the potential to achieve the target remains real.’
Asia sales bright
Based on analysis from Carlo Santarelli, Steven Pizzella, and Alfonso Straffon, Light & Wonder’s Asia’s market sale was a highlight.
Light & Wonder’s international unit sales grew 45 percent year-over-year in 1Q24, and the 5,259 units sold outpaced its 4,345 unit sale estimate quite healthily. Deutsche Bank indicates that the firm continues to make strides in Asia (with Macau-helped by regulatory changes, the Philippines) and Australia.
Pricing was up a healthy 6 percent year-over-year. ‘We believe the path to $1.4 billion is heavily predicated on unit sales remaining strong, specifically in International markets,’ note the analysts.
Light & Wonder’s strong first-quarter results mark its 12th consecutive period of yearly revenue growth, as gaming revenue topped $476 million. The company reports total revenue of $756 million and net income of $82 million (up 203.7 percent).
Gaming machine sales increased by 30 percent, to $205 million, while gaming systems operations were up 9 percent, to $60 million, and table products rose just 2 percent, to $47 million.
