Analyst Predicts Bright Future for Light & Wonder Stock
Light & Wonder (NASDAQ: LNW) has been surging in 2023, amassing a year-to-date gain of 29%. One analyst even thinks the stock has the potential to go much higher.
In a research note to clients on Tuesday, Redburn Atlantic's Andrew Tam started coverage on the gaming device manufacturer with a "buy" rating and a $104 price target, suggesting a potential increase of 40% from the August 21 closing price. During midday trading, Light & Wonder's shares rose 2.41%.
Tam believes the gaming industry remains highly lucrative, and with continuous product enhancements, Light & Wonder is poised to reclaim a larger market share.
The company based in Las Vegas reported that it's on track to achieve adjusted EBITDA of $1.4 billion by 2025.
Light & Wonder's Sales of Assets Win Praise from Tam
In 2021, Scientific Games, the former name of Light & Wonder, sold its lottery and sports betting divisions, which brought in around $7 billion in cash, lowering its leverage from 10.5x to 3.1x. The investments community has applauded this balance sheet restructuring. While lotteries are highly profitable, the trimmed-down version of Light & Wonder now has the finances to focus on higher growth segments. This move may prove beneficial for long-term investors.
"The sale proceeds were used to pay down debt, repairing Light & Wonder’s balance sheet,” stated Tam. “The divestments not only de-levered the business, but also repositioned Light & Wonder towards the faster growing digital segments of social gaming (SciPlay) and online RMG (iGaming)."
Recently, Light & Wonder announced plans to acquire the 17% stake of social casino developer SciPlay it doesn't yet own. This move will bring the companies back together after being separated in 2019. The transaction is slated to be completed in the fourth quarter.
SciPlay's revenue rose 18% in the June quarter, while its net income increased by 28% year-over-year. The company's cash reserves increased by $64.8 million to $394.9 million.
Potential Catalysts for Light & Wonder Stock
Alongside using some of the cash raised from the sale of its lottery and sports wagering units to invest in its digital ventures, Light & Wonder has been a consistent purchaser of its own shares. This indicates that management sees value in the stock, which could provide some level of support if the broader market starts to head south.
Five of the nine analysts covering Light & Wonder rate the stock as "strong buy." Tam's $104 price target, the highest among all analysts, stands out as it is significantly higher than the consensus Light & Wonder price projection of $80.25.
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Source: www.casino.org
