While recent weakness in the tech sector is disappointing, it could be opening up an opportunity for investors to pick up some quality ASX tech stocks at good prices.
One such example is the tech stock named in this article, which Bell Potter has just initiated coverage on.
Image source: Getty Images
Which ASX tech stock?
The company in question is Light & Wonder Inc (ASX: LNW).
Light & Wonder is an American cross-platform global games company that provides gambling products and services.
Its land-based gaming business is a top three supplier of slot machines in the outright sales and lease markets. It is also the number one supplier of both casino management systems and table products.
The company's SciPlay business is a top three developer and publisher of social casino games on mobile and web platforms. Finally, its iGaming business is a leading supplier of real money online gaming content and iGaming content aggregation platforms.
And while Light & Wonder operates globally, over 67% of its revenue is historically derived from the United States market.
Buy rating
According to a note out of Bell Potter this morning, its analysts have initiated coverage on the ASX tech stock with a buy rating and $180.00 price target.
Based on its current share price of $154.78, this implies potential upside of 16% for investors over the next 12 months.
Bell Potter is feeling very positive about the company's outlook due largely to its significant transformation. It expects this to underpin strong earnings growth in the coming years. The broker explains:
LNW's refreshed board and management team, underpinned by several former Aristocrat Leisure executives, has successfully overcome barriers burdening the company prior to 2020. This transformation has positioned the company today for robust earnings growth across each of its three segments. Challenges such as onerous debt levels, an overly diverse and complex asset portfolio and unbalanced equity ownership, have been effectively addressed.
Our favourable view on LNW is predicated on: (1) share gains in the lucrative North American premium gaming operations market following increased and targeted R&D spend; (2) expansion into new adjacent outright slot sales markets; (3) above industry average player monetisation growth in SciPlay; and (4) exposure to forecasted 26% CAGR in US iGaming Gross Gaming Revenue (GGR) to 2028 and ensuing operating leverage.
In light of this, the broker appears to believe that Light & Wonder could be a quality ASX tech stock to buy once the market volatility calms down again.
