Light & Wonder Could Beat 2025 EBITDA Estimates

Posted on: January 30, 2024, 03:21h. 

Last updated on: January 30, 2024, 03:21h.

Helped by new slot machines and strength in the land-based casino industry, Light &Wonder (NASDAQ: LNW) is on pace to beat a previously disclosed 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate.

Light & Wonder stock
The Light & Wonder logo. The company could beat 2025 EBITDA forecasts, says JPMorgan. (Image: PR Newswire)

That’s the take of JPMorgan, which sees the gaming device manufacturer beating the $1.4 billion 2025 EBITDA outlook the company revealed two years ago. The bank added its outlooks include potential upside of 2% to 5% to consensus forecasts on Light & Wonder’s 2023 through 2025 EBITDA outlook. New slot titles, including those featured in Australia, are helping the Light & Wonder cause.

Early performance from the new Dragon Train family of games in Australia demonstrates good early execution,” noted JPMorgan.

Light & Wonder rolled out the Dragon series of gaming machines last August in an effort to gain more share Australia.

Australia Marquee Market for Light & Wonder

Last May, Light & Wonder commenced a secondary listing on the Australian Securities Exchange (ASX) — one step in affirming its commitment to Australia. At the consumer level, the Dragon family of games extend that commitment.

“This family of games has lifted Light & Wonder’s average turnover ratio from 0.55 to 0.76 in New South Wales, and 0.82 to 1.00 in Queensland,” added JPMorgan.

Regarding, Light & Wonder’s finances, the company is increasingly a free cash flow story. Accompanied by rapidly declining leverage, the firm’s free cash flow margins are exceeding those of comparably valued industry peers.

In 2021, Light & Wonder sold its lottery and sports betting units, generating $7 billion in cash that’s been prudently used to slash debt and fund share repurchases. Due to that influx of cash, JPMorgan sees the gaming company continuing to drive leverage lower, potentially signaling that an inflection point for free cash flow generation is nearing.

“Third-quarter 2023 was the first quarter Light & Wonder hit its FCF/EBITDA conversion target; we expect further improvement from here,” according to the bank.

Light & Wonder Catalysts

Light & Wonder delivers fourth-quarter results on Feb. 27 and that could be a catalyst because the company beat earnings per share (EPS) estimates in the prior two quarters and it’s on a six-quarter streak of topping Wall Street revenue forecasts.

Another potential spark for Light & Wonder shares is the possibility that analysts will raise price targets on the name as it trades higher. Currently, the consensus price outlook on the stock is $93.75, which implies upside of 13.70.

Of the 12 sell-side analysts that cover the gaming device maker, eight rate it “strong buy” while one calls it a “buy” with three rating the stock “hold.”

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