Gaming is a booming business. Aristocrat Leisure Ltd (ASX: ALL) and Light & Wonder Inc (ASX: LNW) shares both benefit significantly from continued growth, particularly in the US casino industry.
In the past month, Aristocrat's share price gained over 9%, while rival Light & Wonder went 24% higher.
Bright long-term outlook
Macquarie Group Ltd (ASX: MQG) just released its report on North America iGaming revenue trends. The broker reports that gaming revenues in the US & Canada were around US$3.3 billion in the September quarter, 30% higher than in the same quarter the year before.
Analysts of the broker paint an even brighter long-term outlook:
We expect North American iGaming volumes to exceed US$18bn by 2030 without assuming any new jurisdictional openings, which is a +80% uplift from 2024 (US$10.1bn).
Duopoly in slot machines
Light & Wonder and Aristocrat Leisure have a duopoly in the slot machine sector. As a result, they are well-positioned to take advantage of the growing US market.
Aristocrat, which has a market value of $36 billion, is a global leader in the poker machine field. Light & Wonder has a smaller global footprint and market cap ($11 billion), but is more diversified across physical, digital, and online casinos.
And the winner is?
Macquarie has an outperform rating on the two gaming stocks, both listed on the S&P/ASX 100 Index (ASX: XTO).
The broker has a target price of $75 for Aristocrat shares, representing a potential 27% upside at the time of writing.
The broker notes:
Aristocrat can continue to win market share supported by industry leading design & development spend, which is seen as offensive and defensive, and supports content and hardware commercialisation across the three channels (land based, social casino and iGaming). Legalisation of iGaming and iLottery expands Aristocrat's TAM, and trajectory to generate US$1bn Interactive revenues in FY29.
For Light & Wonder shares, Macquarie has maintained its $170 target price. That's a potential 21% upside for investors over the next 12 months.
In its recent note, Macquarie lists a court case between Aristocrat and Light & Wonder as a company risk for the latter. Light & Wonder has been taken to court by Aristocrat over the development of the Dragon Train game. Aristocrat has alleged that, amongst other things, it infringes its intellectual property.
A recent court ruling granted Aristocrat the right to "obtain discovery of math models" from Light & Wonder. Macquarie qualifies this as a 'downside' in its report.
Litigation with Aristocrat is ongoing and likely not be resolved until either an out of jury settlement (likely 1H26) or a jury decision (likely 2H26).
