Why the Aristocrat share price is storming higher and could keep rising

Aristocrat shares are back on form on Friday…

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Key points

  • Aristocrat shares are rebounding on Friday 
  • A recovery in the tech sector and a bullish broker note appear to be driving this
  • A couple of brokers believe Aristocrat's shares can climb materially higher

The Aristocrat Leisure Limited (ASX: ALL) share price is back on form on Friday.

In morning trade, the gaming technology company’s shares are up 4% to $31.80.

Why is the Aristocrat share price storming higher?

There have been a couple of catalysts for the rise in the Aristocrat share price this morning.

The first is a rebound in the tech sector following an improved night of trade on the Nasdaq index. This has led to the S&P/ASX All Technology Index rising by a sizeable 3.9% on Friday.

Also giving the Aristocrat share price a boost was the release of a broker note out of Macquarie this week which appears to have been lost in the market selloff until now.

According to the note, the broker has retained its outperform rating and $44.00 price target on the company’s shares ahead of its half-year results release later this month.

Based on the current Aristocrat share price, this implies potential upside of 38% for investors over the next 12 months.

What did the broker say?

Macquarie believes the recent market weakness has created an opportunity for investors to pick up shares in a company that is well-placed for growth in the coming years.

This is due to strong performances across its businesses and potential M&A activity. In respect to the latter, the broker highlights that Aristocrat has over $1 billion in cash to play with.

It isn’t just Macquarie that is bullish on the Aristocrat share price. The team at Citi recently slapped a buy rating and $44.00 price target on the company’s shares.

It commented:

Aristocrat represents a compelling long-term growth story, with exposure to ongoing growth in mobile game penetration and potential to grow into new markets.

Despite the Playtech acquisition not proceeding, the immense opportunity in Real Money Gaming remains.

Foolish takeaway

I would have to agree with Citi and Macquarie on Aristocrat. At just 19x FY 2022 earnings based on Citi’s estimates, it appears to be one of the best value tech shares around. Especially given the positive growth outlook for its pokie machine and digital businesses and its sizeable cash balance.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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