The Aristocrat Leisure Limited (ASX: ALL) share price may have dropped lower with the market today, but one leading broker believes there is plenty of upside ahead for the gaming technology company's shares over the next 12 months.
A note out of Goldman Sachs this morning reveals that it has reiterated its conviction buy rating and increased the price target on its shares to $33.70 ahead of its full year results release next week.
This price target implies potential upside of 33% for its shares based on its last close price.
Why is Goldman bullish on Aristocrat Leisure?
According to the note, the broker believes the company is very well positioned to capture further share of the land-based casinos in the United States and benefit from strong growth in mobile games due to successful new game launches.
In addition to this, the broker notes that Aristocrat Leisure's shares are currently priced at just 17x estimated FY 2019 earnings. This is meaningfully lower than its 10-year average versus the ASX 200 Industrials.
What about next week's results?
The broker is expecting another strong result from the company next week. It has forecast full year revenue of $3,597.5 million and a net profit after tax of $750 million.
The latter will be an increase of 38% on the prior corresponding period and compares to the Bloomberg consensus median estimate of $759 million. On a per share basis, Goldman has forecast earnings of $1.17.
Looking ahead, the broker will be expecting guidance for a profit of $970.8 million next year. This represents growth of 29% on Goldman's FY 2018 expectations.
Should you invest?
I think that Aristocrat Leisure's shares are great value at this level. Overall, I feel they are one of the best options for growth investors right now and vastly superior to rival Ainsworth Game Technology Limited (ASX: AGI).
Furthermore, given the low multiples that its shares trade on, it could be a good alternative to high PE tech shares like Afterpay Touch Group Ltd (ASX: APT) and WiseTech Global Ltd (ASX: WTC).
