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.
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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.
