Light & Wonder: Slot Machines Sector Forecasts $2B in 2028 Earnings

Key Highlights: The following points summarize the most important aspects of the slot machines industry, covering key statistics and trends.

Slot machine maker unveiled a new forecast at its investor days
Still expects $1.4 billion in 2025 adjusted EBITDA

Light & Wonder (NASDAQ: LNW) recently made headlines when it told shareholders to expect adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to reach $2 billion by 2028. This announcement came during a challenging period for the broader market and gaming stocks.

slot machines — Image by deluxtrade from Pixabay

Despite facing a rocky first quarter, Light & Wonder has reaffirmed its adjusted EBITDA forecast of $1.4 billion for the year. This prediction entails a compound annual growth rate (CAGR) of approximately 15% from 2022, not accounting for potential advantages from the recent acquisition of Grover Gaming, Inc. and G2 Gaming, Inc. for $850 million.

Strategic Growth and Market Share

The forecast for 2028 assumes that Light & Wonder will gain about 4% in market share within the North American premium slot segment. In addition, earnings per share are expected to double from $5.27 last year to an anticipated $10.55.

According to Stifel analyst Jeffrey Stantial, the projected targets for 2028 are considered achievable and conservative, with organic growth expected to outperform that of competitors.

Furthermore, analysts believe that resolving ongoing litigation with rival Aristocrat Leisure could act as a catalyst for Light & Wonder’s stock, which has a ‘hold’ rating with a target price of $95.

Driving Growth through Acquisitions

The acquisition of Grover is seen as a pivotal driver for future growth, particularly in Indiana, where e-pull charitable devices have only recently become legal.

Jefferies analyst David Katz notes that the Grover transaction is expected to add approximately 10,000 units immediately, with a plan to upgrade content across five current markets and introduce new units in Indiana, set to launch operations in July 2025.

Charitable gaming mirrors traditional casino wagering in terms of monetary stakes and payouts; however, it operates under charities rather than commercial or tribal operators or governmental bodies. Light & Wonder is positioned as one of the key players in this ever-growing sector, which includes various offerings like lotteries, table games, and slot machines.

Grover has achieved profitability, as demonstrated by its adjusted EBITDA of $111 million in 2024. Between 2022 and 2024, the company recorded impressive CAGR figures of 31% for EBITDA and 29% for revenue according to Light & Wonder’s own investor presentation materials.

Future Listing Considerations

Light & Wonder is nearing two years since it conducted a secondary listing of its shares in Sydney, while primarily listed on NASDAQ in New York. There are discussions about possibly transitioning to a sole listing in Australia.

Highlighting the investment significance, Jefferies’ Katz points out that 62% of the company’s issued share capital is currently linked to the US listing, with the remainder from Australia.

In accordance with their investor presentations, Light & Wonder aspires to join the ASX 100, with a longer-term goal to be included in the ASX 50 – two significant indexes representing major Australian stocks.

Conclusion

As Light & Wonder sets its sights on ambitious future earnings, its strategic acquisitions and market adaptability put it in a prime position for growth in the gaming industry. With a focus on enhancing its market share and addressing legal obstacles, the company is gearing up to make substantial strides in the coming years.