Could the Aristocrat (ASX:ALL) share price be a leading ASX 200 growth share?

Could the Aristocrat Leisure (ASX: ALL) share price be a leading ASX 200 growth share to buy after the release of the company's FY20 results?

| More on:
rising leisure asx share price represented by three happy faces on slot machine

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Aristocrat Leisure Limited (ASX: ALL) shares demonstrated significant strength after the company announced its full year results on Wednesday this week. The Aristocrat share price slumped 6% on open before making a sharp recovery to close 4% higher. From trough to peak, this represents a 10% move in share price in just one day. 

At face value, the company's results appeared to be weak given the slump in earnings. However, big brokers reacted positively to the results, especially with the growth in Aristocrat's digital business. All things considered, could the Aristocrat share price be a leading ASX 200 growth share to buy? 

Full year results recap 

Aristocrat's group revenue decreased 5.9% to $4.1 billion, reflecting a 32% decrease in its gaming (land-based) revenue as a result of customer venue closures and social distancing restrictions. This was largely offset by a 29% growth in its digital revenues. 

Earnings before interest, tax, depreciation and amortisation (EBITDA) was 32% lower than the prior corresponding period at $1,089.4 million. Despite lower earnings, Aristocrat maintains a significant balance sheet with almost $2 billion of available liquidity at 30 September 2020. 

Management appears to be confident with the company's financial position and authorised a final fully franked dividend of 10 cents per share.  

Brokers upgrade Aristocrat share price target 

Despite a fall in earnings and the Aristocrat share price trading at a price-to-earnings (P/E) ratio of more than 70, big brokers are bullish on its outlook. 

Citigroup Inc (NYSE: C) raised its Aristocrat share price target from $34.60 to $40.60 and retains a buy rating. This represents almost a 20% upside to Aristocrat's current share price of $33.90 (at the time of writing). The broker believes Aristocrat's FY20 results were conservative and leave the door open for positive surprises in the first half of FY21. Citi increased its expected earnings for Aristocrat for FY21 by 7% and for FY22 by 10%. 

Similarly, UBS Group (NYSE: UBS) raised its Aristocrat share price target from $34.25 to $38.80 and retains a buy rating. The broker was impressed by the company's ability to capitalise on digital business.

Credit Suisse Group (NYSE: CS) was more conservative in its share price upgrade from $30.00 to $37.60 with an outperform rating. It notes that Aristocrat's United States gaming operations were a highlight, but that the Australian contraction reinforced ongoing risks. 

Macquarie Group Ltd (ASX: MQG) largely maintained its Aristocrat share price target from $31.50 to $32.00 with a neutral rating. While it cites better than expected FY20 results, the broker was disappointed by Aristocrat's progress on controlling costs. 

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.

More on Growth Shares

a happy investor with a wide smile points to a graph that shows an upward trending share price
Growth Shares

Here are the top five ASX 200 shares in Macquarie's model growth portfolio

These ASX 200 shares are highly rated by analysts at Macquarie.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Growth Shares

3 ASX shares to buy in 2024 and hold for the next 10 years

Analysts think these top shares are in the buy zone right now.

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Growth Shares

4 ASX growth shares I think will benefit from interest rate cuts in 2024

Not only will home loan holders rejoice, investors of these stocks could also be yelling with joy when the Reserve…

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Growth Shares

3 of the best ASX growth shares to buy now

Analysts see plenty of upside for these buy-rated shares.

Read more »

A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts
Growth Shares

Here's why analysts love these buy-rated ASX 200 growth shares

There's a reason analysts are feeling bullish about these companies.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Growth Shares

Big returns could be coming for high-flying Lovisa shares

Morgans doesn't believe it is too late to snap up this hot stock.

Read more »

Smiling young parents with their daughter dream of success.
Growth Shares

Why these ASX 200 growth shares could be top buys now

Analysts are feeling bullish about these growth stocks. Let’s see what they’re saying.

Read more »

Concept image of a man in a suit with his chest on fire.
Growth Shares

Ignore the noise and buy this hot ASX growth stock

A recent pullback may have created a buying opportunity according to Bell Potter.

Read more »