Light & Wonder’s Stock Holds High Investment Potential, Says Morningstar Analyst

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Emboldened by a nimbler business structure and a healthy allocation for research and development, Light & Wonder’s (NASDAQ: LNW) stock holds the potential for significant investor gains. This viewpoint comes from the desk of Morningstar analyst Angus Hewitt. Given his recent examination of the gaming device manufacturer, he suggests a promising price target of $87 for the share. This suggests an upside of approximately 21% from the present level, despite the stock having dipped 7.33% over the preceding week.

According to Hewitt, while Light & Wonder may not dethrone its primary competitor, Aristocrat Leisure, it should stand its ground against other smaller competitors. Light & Wonder’s decision to sell nonessential lottery and sports betting assets has effectively simplified its business structure, mirroring that of Aristocrat’s.

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Light & Wonder’s business operations now span across social casino, iGaming, and electronic gaming machines (EGMs), thereby consolidating its market position. With Aristocrat and International Game Technology (NYSE: IGT), Light & Wonder is part of the dominant force controlling nearly 80% of the land-based casino slot machine market in North America.

In 2021, the firm, formerly known as Scientific Games, jettisoned its lottery and sports betting segments, securing an impressive $7 billion in the process. These transactions not only significantly reduced its debt but also clarified the investment prospects in Light & Wonder. It enabled the company to reinvest in rapidly growing sectors such as iGaming, supporting increased R&D efforts.

Maintaining a market share in the highly competitive EGM market requires delivery of innovative, high-quality games that keep consumers engaged, Hewitt notes. This in turn necessitates ongoing expenditure on research and development.

At present, Light & Wonder allocates a smaller proportion of its sales towards R&D compared to Aristocrat, yet it surpasses IGT in this domain. Last month, the firm announced the future acquisition of the 17% stake in a social casino developer it had yet to own. We expect this to pave the way for the return of the company it divested in 2019, with the deal expected to finalize in the year’s final quarter.

The prowess of Light & Wonder in pursuing effective R&D is crucial when evaluating its stock potential. This is particularly the case during times when slot sales are stagnant compared to 2019 figures, yet there is a demand for upgrade by casino operators, signifying the potential for growth.

Investment in R&D ensures a continuous string of new products, software developments, and platform enhancements that help stimulate demand and distinguish them from competitors, Hewitt believes. Investment consistency over the long term is key to the enduring success of any gaming machine manufacturer.

To this end, gaming enthusiasts may also like to explore advancements in the world of online casinos. If you are interested in learning more about what such platforms have to offer, we’ve got you covered. At West Island Blog, we’ve curated a list of the top online casinos for this month, carefully evaluating their security, range of games, and user experience for your convenience. A new world of exciting, secure and easily accessible gaming awaits you!

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Melinda Cochrane is a poet, teacher and fiction author. She is also the editor and publisher of The Inspired Heart, a collection of international writers. Melinda also runs a publishing company, Melinda Cochrane International books for aspiring writers, based out Montreal, Quebec. Her publication credits include: The art of poetic inquiry, (Backalong Books), a novella, Desperate Freedom, (Brian Wrixon Books Canada), and 2 collections of poetry; The Man Who Stole Father’s Boat, (Backalong Books), and She’s an Island Poet, Desperate Freedom was on the bestseller's list for one week, and The Man Who Stole Father’s Boat is one of hope and encouragement for all those living in the social welfare system. She’s been published in online magazines such as, (regular writer for) ‘Life as a Human’, and Shannon Grissom’s magazine.