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Why the Aristocrat Leisure share price crashed 26% lower today

The Aristocrat Leisure Limited (ASX: ALL) share price has been amongst the worst performers on the S&P/ASX 200 Index (ASX: XJO) on Monday.

In afternoon trade the gaming technology company’s shares are down over 18% to $22.77.

At one stage today the Aristocrat Leisure share price was down as much as 26% to a 52-week low of $20.72.

Why is the Aristocrat Leisure share price crashing lower?

Investors have been selling Aristocrat Leisure’s shares on Monday following an update from one of its customers, Crown Resorts Ltd (ASX: CWN).

This morning the casino and resorts operator revealed its plans to combat the spread of coronavirus.

These include a restriction on the maximum number of players at each stand-up table to 5 players, as well as restrictions on the number of patrons to 450 within its food and drink areas, banqueting, casino facilities, and conference facilities.

But the biggest change, which has spooked Aristocrat Leisure’s shareholders, relates to poker machines.

With immediate effect, Crown has deactivated every second gaming machine and electronic table game. This social distancing measure has effectively halved the number of pokie machines that will be operating in its Melbourne casino from today.

I suspect it will only be a matter of time until these changes, which were approved by the Victorian Chief Health Officer, are replicated by rivals Star Entertainment Group Ltd (ASX: SGR) and SKYCITY Entertainment Group Limited (ASX: SKC).

And if the same is undertaken globally, it could lead to a material drop in pokie machine orders for Aristocrat Leisure in the near term.

Though, one bright spot is that a decline in casino visitation because of the coronavirus outbreak could lead to an increase in social and mobile gaming. 

This would be good news for Aristocrat Leisure given its strong position in this market. At the end of FY 2019, Aristocrat Leisure’s Digital segment had 7.5 million daily active users generating full year segment revenues of $1.23 billion.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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