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Maxim Group initiated coverage on shares of Light & Wonder (NASDAQ:LNW), assigning a Buy rating and setting a price target of $144.00. The firm's analysis highlighted the company's recovery and growth potential following the challenges of the COVID-19 pandemic.
The firm anticipates that Light & Wonder will achieve sales growth of 11% in 2024 and 8% in 2025, with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) expected to grow by 13% and 12% in those years, respectively. These forecasts exceed the consensus estimates. Furthermore, the firm predicts EBITDA margin expansion of 70 basis points in 2024 and 130 basis points in 2025.
As of the end of the second quarter of 2024, Light & Wonder reported holding $422 million in cash and $3,871 million in debt. The company's net debt leverage ratio stood at 3.0x, which aligns with management's target range of 2.5x to 3.5x. The analyst from Maxim Group views the company's free cash flow of over $600 million per year as sustainable and believes it provides the company with ample resources to reinvest in its operations and repurchase its stock.
The 12-month price target of $144 suggested by Maxim Group is derived from a discounted cash flow analysis and corresponds to a P/E multiple of 26.1x based on the firm's forecast for 2025.
Light & Wonder has reported significant developments in its operations. The firm disclosed an update to the Australian Securities Exchange regarding its CHESS Depositary Interests, a key aspect of its international regulatory compliance, particularly in the Australian market. Furthermore, Light & Wonder has shown a strong Q2 performance, with consolidated revenue rising by 12% to reach $818 million and operating income increasing to $175 million.
The gaming division saw a 14% revenue boost, while the SciPlay (NASDAQ:SCPL) division generated over $200 million in revenue for the third consecutive quarter. The iGaming segment also experienced growth. Additionally, the company initiated a $1 billion share repurchase program and CEO Matthew Wilson set a goal of $1.4 billion adjusted AEBITDA by 2025.
Despite not planning to participate in the sweepstakes market due to regulatory constraints, Light & Wonder continues to view merger and acquisition activity as an opportunity.
InvestingPro Insights
Light & Wonder's strategic moves and financial metrics have caught the attention of investors and analysts alike. According to real-time data from InvestingPro, the company boasts a strong gross profit margin of 70.46% for the last twelve months as of Q2 2024, underlining its efficiency in managing production costs and operations. This impressive margin is a testament to Light & Wonder's ability to maintain profitability, which is further corroborated by the company's positive revenue growth of 12.75% over the same period. These figures align with Maxim Group's optimistic outlook on the company's growth potential.
InvestingPro Tips highlight that Light & Wonder is trading at a high earnings multiple, with a P/E ratio of 32.22, suggesting that investors are expecting higher earnings growth in the future. The company's stock price is also trading near its 52-week high, at 97.8% of this peak value, reflecting strong market confidence. For investors seeking further insights, there are additional InvestingPro Tips available, including analysis on the company's valuation multiples and profitability predictions for the year.
With a market capitalization of $9.59 billion and a solid financial position, Light & Wonder appears to be in a strong position to capitalize on market opportunities. The company's liquid assets surpassing short-term obligations is an indicator of its financial resilience, which is critical for sustaining operations and pursuing growth strategies. Interested investors can explore more in-depth analysis and metrics on Light & Wonder by visiting InvestingPro.
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