Wall Street stock analysts weren’t displeased with Light & Wonder’s fourth-quarter numbers. Neither did they alter ratings or raise price targets.
Deutsche Bank’s Carlo Santarelli stayed with a Hold rating and $89 per share price target, well below the $101.63 per share at which Light & Wonder closed on February 25. He observed that the gamemaker had modestly exceeded both his and Wall Street’s expectations.
However, he noted that the growth was driven by margin improvements (except in igaming), “as net revenue was slightly below expectations.” Santarelli quickly ticked off the high points of the call, including the repurchase of 2.6 million shares of LNW and settlement of an intellectual-property dispute with TCS John Huxley at a cost of $72.5 million. (The lawsuit was inherited from Light & Wonder precursor Scientific Games.)
Truist Securities analyst Barry Jonas stressed that Light & Wonder was four percent higher in fourth-quarter cash flow than anticipated, despite having to pull its Dragon Train games from American casino floors. He added that a revised or 2.0 version of Dragon Train was set to debut in August in Australia, where the original game hasn’t been enjoined.
Management, he said, “highlighted its ability to effectively move past the Dragon Train injunction as the company was able to lean into other brands … and now expects the segment to return to normalized growth in 2025.” Jonas estimated that Light & Wonder was down by only 100 slot machines in North America post-Dragon Train, having replaced 95 of the units with other Light & Wonder titles.
Keeping his powder dry on the effect of Light & Wonder’s purchase of Grover Gaming, Jonas hewed to a Buy rating, but left his price target unchanged at $115 per share.
Staying with a $121 a share price target and a Buy rating, Jefferies Equity Research analyst David Katz emphasized Light & Wonder’s continued momentum in brick-and-mortar casinos. He then noted that the company’s fourth-quarter revenue and cash flow well exceeded his predictions.
Observing that Light & Wonder’s cash flow growth in 2024 was 11.4 percent, Santarelli wrote that it would need to improve 12.4 percent in 2025 in order to achieve $1.4 billion cash flow guidance. Net cash from operations was $633 million, a 7.3 percent uptick.
Gains in American gaming operations offset setbacks elsewhere. The company’s installed base, according to Santarelli, grew by 2,784 machines from 2023 and by 853 devices in the fourth quarter alone. Katz credited the Oregon and Canada markets with driving the increase.
By contrast, international installations fell by 2,162 units year-over-year and by 1,261 machines just in the fourth quarter. Light & Wonder exceeded Santarelli’s domestic-sales forecast by 455 devices, but fell 2,630 machines short overseas. Jonas reported that this was “primarily driven by unfavorable timing and tough comps out of Europe last year.”
Looking ahead, Jonas reported that Macau, the Philippines, and the United Arab Emirates would be prime Light & Wonder targets for capturing market share. He also anticipated the May 20 investor event: “Top of mind for investors is what the next phase of growth for the company looks like.”
