Australian gaming giant Aristocrat remains competitively better positioned in its traditional gaming machine segment than in the online gaming space, with the market currently “too optimistic about Aristocrat’s online real-money gaming venture”, according to investment research firm Morningstar.
In a note, Morningstar analyst Angus Hewitt said that although Aristocrat has been expanding its online casino presence through M&A activity such as last year’s acquisition of NeoGames, the iGaming space remains extremely competitive.
“While iGaming is growing quickly, with the US rapidly deregulating, it is hotly contested. Aristocrat is yet to replicate the same competitive strengths enjoyed in gaming machines,” Hewitt said, adding that gaming machines will likely remain the company’s bread and butter.
“Aristocrat’s dominant position in leased electronic gaming machines underpins its narrow economic moat. Its North American installed base of over 71,000 machines is more than double no-moat Light & Wonder’s installed base of about 34,000 units.”
Following the company’s NeoGames move, Aristocrat has more recently announced a series of structural changes to its omni-channel presence – divesting mobile gaming business Plarium for US$620 million and slashing future investment into another of its social gaming platforms Big Fish Games.
Instead, it is anticipated that Aristocrat will focus its short-term spending on more M&A activity and an AU$750 million share buyback scheme.
However, Morningstar considers the company’s current share price of around AU$65.00 per share is expensive, maintaining a fair value estimate of AU$50.00. This, the research firm says, renders Aristocrat’s buyback slightly value-dilutive although the impact is “more than offset by the time value of money.”
Morningstar has, Hewitt explained, therefore made only minor changes to its forecasts for the 2025 fiscal year, with underlying net profit still expected to reach AU$1.5 billion (US$945 million).
