Analyst Stays Positive on L&W Despite Dragon Link Litigation

Earlier this week, the leading global provider of gaming solutions and equipment, Aristocrat Technologies, seized the initiative in its legal battle against Light & Wonder (L&W). This, however, wasn’t a major hit for the latter, based on its estimates with the exception being a dip in its shares.

Macquarie Analyst Keeps Outperform Rating

Still, despite the injunction granted to Aristocrat by a US court that resulted in the temporary pause of sales of L&W’s “Dragon Train” slot machines in Australia, a leading analyst is optimistic, although retaining a cautious outlook at the same time.

Ahead of the court’s ruling, L&W said to investors that it anticipates $1.4 billion EBITDA in 2025. Additionally, the company reassured investors that the games that are subject to litigation represent less than 5% of the aforementioned figure.

According to Chad Beynon, a leading analyst with Macquarie, who was recently quoted by Casino.org, L&W isn’t out of the hot water, yet. Despite the ongoing legal hurdle, the analyst kept his “outperform” rating for L&W’s stock and confirmed a price target of $117. The price target represented a 27.7% premium on the leading gaming company’s stock as of the market close on Wednesday.

Still, Beynon was cautious, pointing to the lack of significant short-term drivers for the company. Another concern of the leading analyst was the ongoing litigation L&W is facing from Evolution. He acknowledged that in this legal battle, the company is accused of “copying math files and payout structures for table games.”

“Despite marginal earnings revisions, L&W’s de-rating likely reflects risks on the outcomes from litigation events, management’s credibility, and possible medium-term impacts to volumes.“

Chad Beynon analyst at Macquarie

Legal Hurdle Has Limited Impact on L&W

Earlier this month, Jefferies analyst David Katz was bullish on L&W, confirming his positive outlook after a meeting of the company’s leadership. At the time, he retained his “Buy” rating. In light of the expected $1.4 billion EBITDA by 2025, Katz increased his price target from $116 to $128.

The recent court decision, siding with Aristocrat, was announced on September 23 by Judge Gloria M. Navarro. The decision stopped L&W’s “continued or planned sale, leasing, or other commercialization of Dragon Train.” The legal claim stemmed from the rival’s allegations against L&W that it “misappropriated Aristocrat’s trade secrets,” when developing the popular game.