\n Posted on: October 8, 2024, 04:04h.\u00a0\n <\/p>\n
\n Last updated on: October 8, 2024, 04:04h.\n <\/p>\n
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<\/div>\n<\/p><\/div>\n<\/p><\/div>\nShares of Light & Wonder (NASDAQ: LNW) tumbled last week following a legal ruling pertaining to its \u201cDragon Train\u201d series of slot machines, but one analyst argues the decline was too much, too soon and that the stock is undervalued.<\/p>\n In a new report to clients, B. Riley analyst David Bain initiated coverage of the gaming device manufacturer with a \u201cbuy\u201d rating and a $120 price target. That implies potential upside of about 25% from today\u2019s close. The analyst views the stock as deeply discounted relative to historical norms and its peer group.<\/p>\n Despite peer growth outperformance, a significantly de-levered balance sheet, and strong return of capital policies, LNW\u2019s enterprise value\/earnings before interest, taxes, depreciation, and amortization (EV\/EBITDA) valuation is ~40% below its closest peer and 13% below its own historical valuation average,\u201d wrote Bain.<\/p>\n<\/blockquote>\n The stock slumped last week after the US District Court for the District of Nevada granted a preliminary injunction<\/a> to Aristocrat Gaming, which asserted Light & Wonder\u2019s \u201cDragon Train\u201d slots were based on trade secrets behind the Australian company\u2019s \u201cDragon Link\u201d games.<\/p>\n Though popular, \u201cDragon Train\u201d machines were expected to account for less than 5%, or $70 million<\/a>, of Light & Wonder\u2019s expected 2025 EBITA of $1.4 billion \u2014 a forecast the company stood by in the wake of the aforementioned court ruling.<\/p>\n That\u2019s a small percentage and one that arguably fortifies Bain\u2019s argument that the punishment endured last week by the stock was too severe. He noted the company has reiterated its 2025 forecasts and remains committed to returning capital to investors.<\/p>\n<\/div>\n \u201cAfter estimating a potential success range from forward mitigation efforts and including possible one-time damages and previously unanticipated capex, we calculate a ~$6\/share negative impact from Dragon Train disruption,\u201d added the analyst. \u201cImportantly, LNW has at least twice publicly reiterated its CY25E $1.4B guidance since 9\/23 and stated that share buybacks will remain a key corporate focus.\u201d<\/p>\n In a video posted to Light & Wonder\u2019s investor relations website late last week, CEO Matt Wilson said the company is working to pull \u201cDragon Train\u201d slots in North America and replace those devices with its other titles, many of which are popular with bettors.<\/strong><\/p>\n![\"Light](\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/10\/LNW2-858x517.jpg\")
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Light & Wonder \u2018Dragon Train\u2019 Punishment Too Harsh<\/h2>\n
SciPlay Catalyst for Light & Wonder Shares<\/h2>\n