Despite the recent Dragon Train injunction, Deutsche Bank notes that the gaming equipment and services group, Light & Wonder, had a solid 3Q24.
Analysts Carlo Santarelli and Steven Pizzella expressed this optimism following their meeting with Light & Wonder management during the Global Gaming Expo (G2E).
According to the investment memo, Deutsche Bank emphasizes that management appears confident it can mitigate the headwinds posed by the Dragon Train removals, which are expected to impact unit sales by approximately $70 million in the upcoming fourth quarter and beyond.
Analysts anticipate that Light & Wonder will effectively backfill this projected $70 million shortfall within its broader guidance of $1.4 billion. The strategy involves a deeper dive into the gaming title portfolio, along with growth from SciPlay and the iGaming segments.
The Dragon Train titles are required to be removed from casino floors by October 23rd due to the injunction. Deutsche Bank expects the company to adjust its mathematical models while retaining most of the secondary features. To compensate for the removal of fixed daily fee Dragon Train titles, Light & Wonder is likely to rely on popular franchises such as the Huff N’ Puff Money Mansion, as well as other top performers.
Additionally, Light & Wonder is expected to optimize its costs, although the analysts do not foresee these reductions being a significant aspect of the overall strategy.
Furthermore, management remains open to the prospect of smaller-scale mergers and acquisitions (M&A), though Deutsche Bank views this as an incremental component rather than a core strategy. Management reaffirmed its belief that it is still in the early innings of its growth strategy after years of investments in non-traditional slot adjacencies.
Deutsche Bank also mentions that one area worth monitoring is the potential for larger-scale replacement opportunities in Macau due to evolving technology standards. Additionally, there are ongoing discussions regarding Historical Horse Racing (HHR) in several international markets, presenting further opportunities for growth.
