Having to pull Dragon Train games from its warehouses and off casino floors would be “modestly impactful” to maker Light & Wonder, opined Jefferies Equity Research analyst David Katz in an October 14 investor note. Long-term, Katz discerned no earnings disruption at all.
“We believe that the product momentum should otherwise continue and, therefore, that the prospects for double-digit EBITDA growth thru 2025 are reasonably high,” wrote Katz following meetings with Light & Wonder at Global Gaming Expo. Company executives indicated that Dragon Train sales represented five percent or less of their 2025 earnings guidance.
Katz kept a $122 per share price target on LNW stock, as well as a Buy rating. Of the company’s earnings guidance, he wrote, “Our impression is that the portion of premium participation game earnings is similar, which is a key driver of our premium valuation.”
His opinion of the Light & Wonder product pipeline was that it’s robust and “while Dragon Train was intended as a key element, the talent acquisition has been broad enough to continue driving the business.”
The analyst exonerated Light & Wonder, saying he felt it had no intention of being deceptive. He believed that product details that came to light in the discovery process would not have otherwise become known.
Katz’s verdict? “We do believe that [management] could have initially investigated more thoroughly upon the initial suit, but its initial protocols and the actions taken since the event occurred seem appropriate to us.”
As for the impact on sales, Katz was of the opinion that there would be some. However, Light & Wonder’s competitors were mostly involved in lengthy merger-and-acquisition transactions that would limit their ability to counterstrike.
