Light & Wonder: A Bargain At First Glance, But Trades Above Peers After 10% Drop

Summary

• Light & Wonder has made significant progress by divesting its lottery and sports betting sectors, lowering its debt burden, and concentrating on digital gaming, which has led to a staggering 900% increase in stock value.
• Since restructuring, the company's profitability margins have seen substantial improvements, with gross margins rising from 60% to 70%, and EBIT margins climbing from the low teens to the low twenties.
• Despite impressive growth and solid financial health, Light & Wonder appears to be slightly overvalued when compared to its industry peers. This situation suggests a 'Hold' rating with a target price of $85.
• Future expansion is anticipated from the gaming, SciPlay, and iGaming divisions. However, given its current valuation, it is advisable to be cautious—buying should be considered in the mid-to-low $80s range and selling if prices exceed $100.

Light & Wonder's Turnaround

While IGT (IGT) is focusing heavily on lotteries and is divesting its digital gaming operations, Light & Wonder, Inc. (NASDAQ:LNW) has opted for an entirely different strategy.

Analyst’s Disclosure: The author holds no stock or derivative positions in any companies mentioned and does not intend to initiate such positions within the next 72 hours. This article reflects the author's own opinions and they are not receiving compensation aside from this publication. There is no existing business relationship with any companies referenced.

Important Notice: Past performance is not indicative of future results. No investment recommendations or advice are provided, and personal investment suitability should be assessed. The opinions expressed may not align with those of others associated with this publication.

Future Outlook and Recommendations

The overall performance of Light & Wonder indicates a strong potential for growth driven by segments like gaming and online gaming options. However, investors should be wary of the current pricing relative to other market players.

In conclusion, while the turnaround strategy has proven effective thus far, the valuation metrics suggest that caution is warranted in the current trading environment.

stocks, growth, valuation