On Thursday, Stifel adjusted its price target for Light & Wonder (NASDAQ:LNW), increasing it to $103.00 from the previous $97.00, while maintaining a Hold rating on the stock. The revision follows a series of investor meetings with the company's CFO, Oliver Chow, and Senior Director of IR, Steve Wan, at a consumer summit in Jackson Hole, Wyoming.
During these meetings, several key points were highlighted that support a positive outlook for the company in the coming years. Light & Wonder is expected to see benefits from new game releases, including "Dragon Train" and "Squid Game," which are anticipated to boost slot machine shipments and installations through 2024 and 2025.
The company's international reach and expansion into adjacent markets are also seen as factors that will contribute to its growth.
Despite facing competitive challenges in its Systems & Table Products division, Light & Wonder is transitioning to a subscription-like model, which is expected to justify a higher valuation multiple. Additionally, the company is focusing on perfecting its live dealer offerings in Michigan before pursuing expansion into other geographical areas.
Management at Light & Wonder has identified opportunities for further growth in the social gaming sector, particularly in average revenue per daily active user (ARPDAU), and anticipates margin improvements from direct-to-consumer initiatives. With a strategic approach to growth, the company is confident in achieving its $1.4 billion adjusted EBITDA target for 2025.
In light of these developments, Stifel has raised its 2024 and 2025 adjusted EBITDA estimates for Light & Wonder by 2% and 1%, respectively. However, the firm maintains a Hold rating on the stock, suggesting that the current valuation may already reflect the anticipated upside.
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