Shares in Aristocrat Leisure Ltd (ASX: ALL) are seen as a good buy at current levels by more than one analyst these days, with the team at Jarden this week releasing new research which upgraded the shares from neutral to a buy recommendation.
Aristocrat is a $40.6 billion company that, over the past few years, has rapidly expanded its digital offerings and now operates across three core pillars of poker machines, its Product Madness free-to-play mobile game division, and Aristocrat Interactive, which operates in the real money-gaming area, including iLottery games.
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Solid base to build from
Jarden analysts recently ran the ruler over the company, and they like what they see, saying Aristocrat is "a high-quality defensive growth company, offering robust recurring revenues and self-funded growth''.
They went on to say:
We see Aristocrat as well positioned to deliver consistent high single- to low double-digit earnings growth over the forecast period, via land-based and iGaming share gains, acquired NeoGames earnings and buybacks.
The Jarden analysts said the company had a conservatively geared balance sheet, and they were now factoring in another $1 billion in share buybacks from the company, on top of the current $750 million buyback the company has so far announced, and of which just $166 million remains.
They also said they believed the company was well-positioned to spend more than $3 billion on new acquisitions.
Longer term, we expect prudent capital management (further buybacks or M&A) will drive upside risk to our estimates.
Shares looking cheap
Jarden has a 12-month price target of $75 on Aristocrat shares, compared with the current price of $66.71.
If this level is achieved, investors will get a 12.4% capital return. The company also has a dividend yield of 1.3% according to data sourced from the ASX.
Macquarie also recently released a research note on Aristocrat, with their analysts also assigning a $75 price target to the shares.
The Jarden team identified some downside risks for Aristocrat, including a potential economic slowdown in North America, the loss of key talent, or potentially overpaying for acquisitions.
But the Jarden analysts say they expect that Aristocrat will report accelerated growth in the second half of 2025 when it reports its full-year results on 12 November.
They are expecting the company to post revenue of $6.28 billion, up 11% on the previous corresponding period, and earnings of $2.19 billion, up 13%.
The Jarden team does prefer fellow gaming company Light & Wonder Inc (ASX: LNW) to Aristocrat, however, saying its recent share price underperformance was "likely largely tied to non-fundamental factors''.
