Now could be a great time to pick up Light & Wonder Inc (ASX: LNW) shares.
That's the view of analysts at Goldman Sachs, which are tipping this ASX tech share to deliver big returns.
What is the broker saying about this ASX tech share?
Goldman Sachs notes that the gaming technology company held its investor day event this week and unveiled its multi-year growth strategy.
Commenting on the event, the broker said:
LNW hosted an Investor Day outlining the building blocks of growth beyond FY25, introducing new FY28 financial targets including: (1) AEBITDA of US$2bn including the acquisition of Grover, which implies a CAGR of +13% from FY25 (GSe US$1.4bn); and (2) EPSA > US$10.55. LNW also remains committed to a primary ASX listing, targeting future ASX50 inclusion.
The broker is feeling positive about the company's outlook and potential to win market share. It adds:
Gaming market share to grow +4% in FY28 across both NA premium installs (which are higher margin) and global game sales from FY24 levels (i.e. from 17% to 21% and 27% to 31% respectively).
NA premium leased content continues to grow its representation on gaming floors (vs. outright sale, >15% of floor) driven by strong content and favourable pricing models, which we believe will support LNW's share ambitions as a 'Big 3' player with a sizable R&D budget (i.e. targeted 17% of revenue incl. capex) to continue delivering high-indexing games. Additionally, we highlight LNW's proven ability to grow global ship share including +8% share gains (to 27%) from FY22 to FY24.
Big return potential
In response to the update, Goldman Sachs has held firm with its buy rating and $165.00 price target on the ASX tech share.
Based on its current share price of $129.01, this implies potential upside of approximately 28% for investors over the next 12 months. No dividends are expected during the forecast period.
Overall, the broker believes the company is well-placed for growth and feels that its shares deserve to trade on higher multiples. It concludes:
We believe LNW is well-placed to continue winning market share in ANZ and North America gaming operations, driving strong earnings growth to achieve its FY25 AEBITDA target of US$1.4bn. Additionally, we believe SciPlay is out indexing the social casino segment driven by higher monetisation rates and modest user growth, and while iGaming is relatively small now, LNW's pedigree in land-based should provide a key advantage in this large and growing market.
We see continued improvement in FCF conversion which is a key factor justifying the company's valuation uplift, and which provides optionality for capital management initiatives.
