Investment bank Jefferies has reiterated its “BUY” rating on global gaming giant Light & Wonder and revised upwards its Adjusted EBITDA estimates for the remainder of 2024, citing strength in demand around unit shipments and installed base in Asia and Australia.
In a note, Jefferies analysts led by David Katz referenced Light & Wonder’s stated ambition of achieving annualized Adjusted EBITDA of US$1.4 billion by 2025, observing that management “continues to reiterate confidence that it can accelerate the business to reach its 2025 target.
“We believe management’s messaging has evolved to present greater detail on the necessary growth drivers to meet its 2025 target, which require broad, solid execution in our view,” they wrote.
According to Jefferies, achieving its US$1.4 billion EBITDA target remains a close call, with the investment bank revising down its FY24 EBITDA estimates from US$1.4 billion to US$1.36 billion – despite raising its price target on Light & Wonder shares from US$113 to US$118.
However, in the short-term those estimates have been increased – primarily on margins – with 2Q24 Adjusted EBITDA estimates raised from US$297 million to US$310 million and F& 24 estimates from US$1.2 billion to US$1.23 billion.
The changes, Jefferies said, are “based on mix of unit shipments among the US and Canada versus international, moderating the ramp in the domestic installed base and increasing the international installed base, increasing W/U/D, while increasing game ops gross margins.
“In short, we reflect current operating trends and the strength in demand in Asia and Australia.”
Longer term, Jefferies said its view remains largely unchanged on the expectation of more successful product launches through the remainder of 2024, including the recently launched Dragon Train series.
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