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Light & Wonder Inc Ordinary Shares LNW

Morningstar Rating
$102.44 +1.93 (1.92%)
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Company Report

Light & Wonder Earnings: Resonating Content Drives Strong Results Across All Segments

We lift our fair value estimate for shares in no-moat Light & Wonder by 8% to USD 97/AUD 150 on the back of higher earnings forecasts for the core gaming business. Underlying 2023 EBITDA lifted 22% to USD 1.1 billion, about 3% ahead of our forecast. The firm enjoyed double-digit revenue and earnings growth across all segments by leveraging content research and development spending across gaming, SciPlay, and iGaming. R&D investment is necessary for a healthy pipeline of new products, software developments, and platform enhancements. However, we do not think Light & Wonder has carved an economic moat. While hit games can come down to chance, we do not believe Light & Wonder has garnered the appropriate intellectual property or brand assets to enjoy excess economic returns over the long run, particularly given stiff competition from market leader Aristocrat.

Price vs Fair Value

LNW is trading at a 6% premium.
Price
$102.44
Fair Value
$33.00
Uncertainty
High
1-Star Price
$763.86
5-Star Price
$86.10
Economic Moat
Vmp
Capital Allocation
Pswkrqvhl

Bulls Say, Bears Say

Bulls

Stringent regulatory licensing requirements create barriers to entry for new players, protecting the market share of Light & Wonder and other incumbents.

Bears

Regulatory tightening of land-based gaming, particularly in Australia, may damp demand for Light & Wonder’s electronic gaming machines.

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News

Trading Information

Previous Close Price
$100.51
Day Range
$99.00102.63
52-Week Range
$53.77102.63
Bid/Ask
$102.00 / $102.69
Market Cap
$9.22 Bil
Volume/Avg
667,332 / 628,299

Key Statistics

Price/Earnings (Normalized)
27.67
Price/Sales
3.28
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
2.10%

Company Profile

Light & Wonder is principally an electronic gaming machine manufacturer, selling machines to pubs, clubs, and casinos. The firm is licensed in most jurisdictions allowing gambling globally. Light & Wonder is one of the three largest players in the space along with International Game Technology and Aristocrat Leisure. SciPlay, about one fourth of revenue, develops and distributes casual mobile games, principally in the social casino niche. The more nascent iGaming business sits between these two businesses, providing digital content and capabilities to real-money gaming providers.
Sector
Consumer Cyclical
Industry
Gambling
Stock Style Box
Small Growth
Total Number of Employees
6,500

Competitors

Valuation

Metric
LNW
DKNG
WYNN
Price/Earnings (Normalized)
27.6725.50
Price/Book Value
12.0524.49
Price/Sales
3.285.491.75
Price/Cash Flow
14.189.17
Price/Earnings
LNW
DKNG
WYNN

Financial Strength

Metric
LNW
DKNG
WYNN
Quick Ratio
1.341.051.85
Current Ratio
1.881.341.93
Interest Coverage
1.66−316.161.15
Quick Ratio
LNW
DKNG
WYNN

Profitability

Metric
LNW
DKNG
WYNN
Return on Assets (Normalized)
6.59%−11.51%3.39%
Return on Equity (Normalized)
40.67%−44.18%
Return on Invested Capital (Normalized)
13.13%−20.84%7.57%
Return on Assets
LNW
DKNG
WYNN
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