Growth outlook fails to save the Aristocrat share price today

The Aristocrat Leisure Limited (ASX: ALL) share price tumbled in the market sell-off as it posted its outlook for the year.

| More on:
three sad face icons on a gaming machine

Image Source: Getty Images

The Aristocrat Leisure Limited (ASX: ALL) share price tumbled in the market sell-off as it posted its outlook for the year.

The Aristocrat share price lost 3.5% to a one-month low of $30.73 when the S&P/ASX 200 Index (Index:^AXJO) crashed 2.5% at the time of writing.

But Aristocrat is in good company. All sectors on the ASX are trading in the red, and its growth shares that are taking the beating.

Growth shares taking brunt of selloff

It’s growth darlings like the Afterpay Ltd (ASX: APT) share price, Ltd (ASX: KGN) share price and Pointsbet Holdings Ltd (ASX: PBH) share price that’re leading the sell-off.

Aristocrat falls into the “growth” category too. It’s more about rising bond yields that is behind the sell-off in the Aristocrat share price than its outlook, in my view.

The gaming machine maker issued a trading update at its annual general meeting today. Management is forecasting growth for the financial year ending 30 September 2021 over FY20.

Aristocrat share price ignores outlook for 2021

It plans to do this by maintaining or growing its market leading positions in Gaming Operations. This is measured by the number of machines that are operating and game performance.

Aristocrat has grown its “floor share” in gaming venues and it believes this will continue.

But it’s the digital business that is exciting growth investors. On that front, management is tipping further growth in Digital bookings. It also expects User Acquisition spend to remain between 25% and 28% of overall Digital revenues.

Are margins under pressure?

However, the growth will come at a cost. Aristocrat anticipates an increase in costs across the business as it builds scale and continued investments to drive longer-term growth.

The dour margin forecast may have spooked some investors, but rising bond yields are also casting a shadow over the group.

Why rising bond yields matter to the Aristocrat share price

The 10-year US government bond yield jumped over 1.614% last night to a more than one-year high, reported CNBC.

Bond investors were spooked by poor demand for the US government’s latest bond auction and the risk of rising inflation. The 10-year Australian bond yield is also being pushed higher and higher yields will lower the valuation of shares, particularly growth shares.

ASX shares that can continue to grow their top and bottom lines regardless of the volatile economic environment will eventually win out over the longer-term.

But it’s the more speculative shares that got pumped up by record low rates that will suffer the most in a rising yield environment.

Watch out fellow Fools! The era of cheap money could be coming to an end.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Brendon Lau owns shares of Aristocrat Leisure Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ltd and Pointsbet Holdings Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended ltd and Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

Rede arrow on a stock market chart going down.
Share Fallers

Why the Integrated Research share price is cascading 15% today

Clouds gather around Integrated Research amid latest trading update.

Read more »

Red arrow going down, symbolising a falling share price.
Share Fallers

Why Imugene, Integrated Research, Monash IVF, and Step One shares are sinking

These ASX shares are falling on Monday...

Read more »

Share Fallers

These were the worst performers on the ASX 200 last week

These ASX 200 shares were sold off last week...

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

Why A2 Milk, Gold Road, GrainCorp, and Monash IVF shares are dropping

These ASX shares are falling on Friday...

Read more »

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Share Fallers

Why is the CSR share price lagging the ASX 200 on Friday?

The building products manufacturer has had a difficult year so far in 2022.

Read more »

A group of disappointed board members.
Technology Shares

Why is the Novonix share price down 9% today?

Novonix extends its time in the red today, adding to already heavy losses in 2022.

Read more »

Red arrow going down on a stock market table which symbolises a falling share price.
Share Fallers

Why Block, IDP Education, Monash IVF, and Xero shares are dropping

These ASX shares are falling hard on Thursday...

Read more »

Red arrow going down symbolising a falling share price.
Broker Notes

Why is the CSR share price plunging 9% today?

The broker's have weighed in with their opinions after CSR's earnings yesterday.

Read more »