Sky Is The Limit For Light & Wonder

This story features LIGHT & WONDER INC, and other companies. For more info SHARE ANALYSIS: LNW

The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Light & Wonder paints a picture for investors by setting aggressive targets out to FY28, to the general approval of analysts.

-Light & Wonder used investor briefings to set ambitious growth targets
-Company is on track to achieve FY25 guidance
-Shares seen trading at a valuation discount
-Primary ASX listing still in process

By Mark Woodruff 

The growth strategy presented at last week’s investor day in New York reinforces Light & Wonder’s ((LNW)) profile as a multi-year compounding business, comments broker Morgans, although execution risks and broader macroeconomic factors will need to be closely monitored.

New FY28 targets are aggressive, yet analysis by Jarden concludes they are achievable based on management’s recent track record, increased business scale, and fresh opportunities.

Certainly, Goldman Sachs believes content-led investment will drive market share gains across Light & Wonder’s core business segments, while UBS highlights significant potential upside for the company’s valuation multiple.

The latter suggests last week’s investor day should reinforce market confidence in Light & Wonder’s growing market share and sustained profitability beyond 2025.

The share price is trading at a valuation discount, suggests Morgans, reflecting ongoing litigation, tariff, and listing uncertainty. This broker has increased its medium-term growth assumptions across all reporting segments.

Currently, Light & Wonder has a primary listing on the Nasdaq, as well as a secondary listing on the ASX, but management is looking at a primary ASX listing, targeting future ASX50 inclusion.

Jarden anticipates such a move will provide a further boost to the share price.

What does Light & Wonder do?

Light & Wonder is a rapidly growing supplier of land-based slot content, delivering across its integrated verticals: Gaming (land-based), SciPlay (social), and iGaming (online gaming).

The company has also established a new Charitable Gaming division following the completion of its acquisition of Grover Gaming’s charitable gaming assets on May 19.

It is Jarden’s assessment the company’s R&D function remains the core engine powering growth across all four channels.

This broker describes a flywheel effect in play, with momentum in market share and earnings over the past three years reinforcing itself through scalable R&D investment, an expanding content library, and the company’s reinvestment capability to drive sustained growth.

The company designs, develops, manufactures, and distributes gaming machines and video gaming terminals in markets across the Americas, the Middle East, Africa, Europe, and Asia-Pacific.

In a market dominated by a few key players, Light & Wonder and Aristocrat Leisure ((ALL)) operate as duopoly suppliers.

Light & Wonder is the only peer to offer long-term financial guidance, reinforcing its status as Morgans’ preferred exposure in the sector.

Since completing its restructuring and rebranding in April 2022, the broker observes the business has demonstrated strong cash conversion and returns on capital. It’s felt ongoing balance sheet deleveraging provides potential for inorganic growth opportunities and flexibility for capital returns to shareholders.

Canaccord Genuity assumes the company will continue its $300m annual share buyback program through to FY28.

In summary, management’s FY28 targets are supported by anticipated share gains across all verticals, underlying market growth, and improved yield metrics.

Investor day targets

For FY25, management stated it is ‘on track’ to deliver its US$1.4bn adjusted earnings target, which compares to the US$1.36bn forecast by UBS pre the Grover acquisition.

Further out, Light & Wonder’s new FY28 financial targets include adjusted earnings (EBITDA) of US$2bn, incorporating Grover, exceeding forecasts by UBS and consensus for US$1.77bn and US$1.80bn, respectively.

While no numerical targets for Grover were provided, it is clear to the analysts at Citi expansion into new states presents potential upside to management’s forecasts.

The additional FY28 target for adjusted earnings per share (EPSA) to exceed US$10.55 was broadly in line with market expectations, though it was positioned as a minimum and may be further supported by future buybacks.

Jarden considers this target conservative in light of the adjusted EBITDA goal and anticipated growth in free cash flows.

Notably, the analysts emphasise these FY28 targets do not factor in any contributions from new iGaming launches or other potential market expansions.

Canaccord Genuity sees scope for management to reach its FY28 targets, noting Gaming must continue to do the heavy lifting with Grover likely to be the next strongest contributor.

Risks include tougher macro conditions and/or a slower assumed share take in Gaming; increased competitive intensity in Charitable; and daily active user (DAU) pressure and/or slower growth average revenue per DAU in SciPlay, cautions Canaccord.

Goldman Sachs notes the adjusted EBITDA target implies a compound annual growth rate of 13% from FY25 and compares to the broker’s US$1.4bn forecast.

Digital assets are expected to scale and increase profitability. Also, Gaming market share is forecast to grow by 4% in FY28 across both North America premium installs and global game sales.

UBS forecasts share gains of 2-3 percentage points in Gaming supported by continued R&D investment and new game performance as a lead indicator, but also with an expectation Aristocrat’s business remains strong too.

Also, after the acquisition and merger of competitors Everi Holdings and International Game Technology’s Gaming & Digital business by Apollo Funds, UBS expects this combination will resurge under new ownership, making incremental market share gains more difficult.

Targets by division

Within the Gaming division, Light & Wonder designs and manufactures slot machines, table games, shuffling machines, and casino management systems for casinos worldwide.

Between 2024 and 2028, the company is targeting a 400-basis-point market gain for its North American premium install base, aiming to exceed 25%, while global ship share in game sales is expected to reach approximately 30%, also reflecting a 400-basis-point increase.

No specific targets were disclosed for Grover.

Citi describes the premium install base goal as “ambitious”, noting management has added only around 100 basis points over the past three years through the first quarter of 2025. Current market share is 17% in 2024, compared to Aristocrat’s 37% and IGT’s 16%.

Ongoing expansion is also expected into adjacent segments such as regulated skill-based gaming in Nebraska, multi-game in the EU, Canada’s video lottery terminal (VLT) market, and charitable gaming via Grover.

Through its SciPlay division, Light & Wonder develops and operates social casino and casual games across mobile and web platforms, offering players a casino-style experience outside of traditional venues.

Over the same period (2024-2028), management anticipates average revenue per daily active user (ARPDAU) for this division will increase by approximately 30%, broadly in line with Morgans’ expectation, while direct-to-consumer (DTC) revenue is projected to surpass 30% of the segment’s total.

Morgans identifies new market entry and greater user acquisition efficiency as key growth drivers, while Citi notes the DTC revenue target appears attainable, especially following a recent US court ruling requiring Apple to cease charging its 27% commission on third-party payment platforms.

Light & Wonder also supplies digital gaming content and technology to licensed operators through its iGaming & Online Platforms division, serving both online casinos and sports betting platforms.

Management aims to increase its first-party content share by 300 basis points, targeting a global market share of over 10% by 2028, driven by expansion into emerging markets and a broader content portfolio.

Citi points out management’s 2028 targets do not rely on additional US states legalising iGaming.

A driver for growth in Charitable Gaming is expanding market share in the company’s existing five markets, notes Canaccord, along with entry into additional legalised states, enhancing operating leverage, and future state legalisation such as for Indiana.

Outlook

Five of the brokers monitored daily by FNArena conduct research on Light & Wonder. Since the investor day, Morgans (target increased to $200 from $193), UBS ($195 from $192), and Citi have refreshed analysis, while reports for Macquarie and Bell Potter remain outstanding.

All are Buy-rated with an average target of $193.80, suggesting just over 42% upside to the $136.27 share price at the close of trading on May 26.

Outside of daily coverage, Buy ratings are also unanimous across brokers Canaccord Genuity, Goldman Sachs and Jarden. These three left their respective targets unchanged, keeping their average at $183.

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