On Thursday, Goldman Sachs (NYSE:GS) initiated coverage on Aristocrat Leisure (ALL:AU) (OTC: ARLUF) stock, a global gaming company. The firm assigned a neutral rating and a price target of AUD55.30.
The company, known for its strong presence in the land-based gaming sector, is anticipated to experience robust growth in the 2024 fiscal year, particularly in North American gaming operations, where it is expected to outperform with over 6,000 net installations.
Aristocrat Leisure's leadership in land-based gaming content and cabinets is well-established, bolstered by its investment in research and development, which includes profit-sharing with game designers.
Despite a positive outlook on the company, the neutral rating reflects several factors that temper expectations. Among these is the prediction that growth rates will decelerate after 2024 as the company approaches a natural market share limit.
Additionally, the competitive landscape in Australia and New Zealand is intensifying, with competitors like LNW poised to challenge Aristocrat Leisure's long-standing dominance in the region.
The company's interactive revenue is projected to grow at a greater than 20% compound annual growth rate over five years, surpassing US$1 billion by the 2029 fiscal year.
This ambitious target exceeds the consensus estimate of US$688 million, underscoring the need for a stronger execution track record in the relatively new realm of real money gaming (RMG).
Finally, the ongoing strategic review of Aristocrat Leisure's Pixel United assets, primarily casual games, aligns with the company's strategy to enhance synergies between its social casino portfolio and its land-based gaming operations. This move is part of Aristocrat Leisure's broader efforts to consolidate its position in the gaming industry.
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