Aristocrat (ASX:ALL) share price launches to record highs in May

Topping pre-COVID highs. Check. Breaking record highs. Check. The Aristocrat share price was unstoppable in May.

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The Aristocrat Leisure Ltd (ASX: ALL) share price booked a new all-time record high of $42.10 on 28 May.

Its shares have made a quick turnaround from falling 4.5% to $30.36 on 26 February after its annual general meeting presentation to an earnings upgrade on 17 May that propelled its bullish run to record highs.

Its shares have since taken the foot off the gas, closing May at $41.05.

What a month it was for the Aristocrat share price

Aristocrat shares staged a bullish recovery after its February AGM pullback, delivering three consecutive month-on-month gains from March to May.

Its shares retested pre-COVID highs of $38 on 10 May. But as the Aristocrat share price looked set to break out into new all-time record highs, the S&P/ASX 200 Index (ASX: XJO) staged a sharp ~2.65% fall between 11 and 13 May.

The three-day selloff saw Aristocrat shares tank 3.80% lower from $38.00 to $36.56. And just as some investors might have started to think “the top is in”, Aristocrat announced a half-year earnings upgrade on 17 May that pushed its shares right back up to record highs of $39.50 on the day.

The announcement highlighted a 12% increase in normalised net profit after tax and before amortisation of acquired intangibles (NPATA) to $412 million and a 6% increase in normalised earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $750 million.

The upgraded guidance was driven by stronger than expected consumer sentiment and economic conditions in the United States and Australia/New Zealand (ANZ), which drove profit growth in its casino machine business. Its growth was further supported by its digital games business, which delivered revenue and profit growth against the elevated prior corresponding period.

Aristocrat full year results

Aristocrat announced its actual full-year results just a few days later on 24 May, with NPATA and EBITDA of $411.6 million and $750.3 million. The full-year results announcement reiterated the stronger than expected consumer sentiment and economic conditions in the US and ANZ.

Another highlight was Aristocrat’s digital games segment. The company advised that its growth had propelled it into a top 5 mobile games publisher in tier 1 western markets, according to leading global data and analytics provider App Annie. This means Aristocrat is going toe-to-toe with household names such as Activision Blizzard Inc, Zynga Inc and Bandai Namco.

Business outlook

Looking ahead, Aristocrat advised that it “plans for strong growth over the full year to 30 September 2021”.

Despite no dollar figure guidance, the company expects to enhance its market-leading position in casino gaming operations and drive further growth in its digital games business. The outlook flagged an increase in overhead expenses as it scaled and delivered on its growth strategy.

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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Activision Blizzard. The Motley Fool Australia has recommended Activision Blizzard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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