UPDATE: Analysts are forecasting a potential 55% surge in shares of Light & Wonder Inc (ASX: LNW) as the gaming stock faces a pivotal moment amidst a looming legal battle. This comes as the poker machine manufacturer, formerly linked with Aristocrat Leisure Ltd (ASX: ALL), grapples with a lawsuit over alleged trade secret violations.
Just announced, the lawsuit from Aristocrat, valued at $40.6 billion, claims that Light & Wonder has infringed on proprietary game designs and improperly recruited game developers to create the game Dragon Train. Aristocrat’s legal team argues that the game’s mechanics are strikingly similar to their own products and were developed by a former employee. Light & Wonder’s executive chair, Jamie Odell, previously worked at Aristocrat and vehemently denies these allegations.
According to Jarden analysts, despite the ongoing litigation, the fundamentals of Light & Wonder appear solid. They predict that the company’s net debt will plummet from $4.71 billion this year to $2.47 billion by FY29, even when considering a hypothetical settlement of $200 million (approximately $305 million AUD) related to the lawsuit.
Jarden’s recent report highlights that Light & Wonder is a high cash-generating business, suggesting that current financial constraints are merely temporary. They expect the company to engage in a significant stock buyback of around $920 million (about $1.4 billion AUD) during the current financial year.
In an exciting development, Jarden projects the company will report a year-on-year earnings growth of 14%, reaching approximately $363 million (around $553.6 million AUD) for the third quarter. Analysts have set a price target of $180 for Light & Wonder shares, sharply higher than the current trading price of $115.80. If realized, this would yield a significant return for investors.
Macquarie also shares a bullish outlook on Light & Wonder, issuing a price target of $180 with an outperform rating. The company is slated to release its third quarter results on November 6, 2023, a date that investors should mark for potential market movement.
As the gaming industry braces for a showdown in court, the implications of this lawsuit could reshape the competitive landscape. Investors are watching closely, with many eager to see how the situation unfolds.
With analysts bullish on Light & Wonder, this may be the moment for investors looking for substantial returns in the gaming sector. Stay tuned as updates continue to emerge on this developing story.
