When it comes to companies operating in the gaming and poker machine spaces Australia has a couple of the world majors, with Aristocrat Leisure Ltd (ASX: ALL) being one.
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New broker report
RBC Capital Markets has just initiated coverage of the stock, and they have an outperform rating on it, as well as a bullish share price target which we'll get to shortly.
Interestingly one of the characteristics of gaming spending over the past six weeks has been its resilience in the face of global uncertainty.
AS RBC's Mark Wilson says in his report on Aristocrat:
Notwithstanding the Iran conflict and cost of living pressures, global gaming markets remain resilient as evidenced by recent gaming expenditure data. In 1Q26, US commercial gaming revenue was up 5% on the previous corresponding period with land-based casino gross gaming revenue (GGR) up 3% and iGaming GGR up 18%.
Mr Wilson said Aristocrat still has room to grow, despite already holding a commanding position in the market.
As he said:
Aristocrat's recent game performance highlights that it is well-positioned to grow incremental market share, notwithstanding that it has a current 43% share of the North American Gaming Ops market and a 31% share of the Outright Sales market.
Mr Wilson said RBC believes there is upside risk to their earnings forecasts if the company's Aristocrat Interactive division can achieve its revenue target of US$1 billion by FY29.
He went on to say:
The iGaming market is growing in excess of 20% pa and Aristocrat has just a 3.5% share of the iCasino market, ahead of the launch of Lightning Link.
More broadly Mr Wilson said the company's balance sheet was in fine shape.
Given the strength of Aristocrat's recurring revenue businesses, we expect Aristocrat will be able to generate free cashflow in excess of $1.7 billion per annum, which has been one of the key drivers of Aristocrat's strong balance sheet. This provides the company the ability to seek acquisition opportunities as well as return surplus capital to shareholders via share buybacks. We expect these to be ongoing.
Capital management options
Mr Wilson's report says the company has just $234 million remaining under its current $1.5 billion buyback program which is scheduled to run until March 2027, raising the prospect that a new buyback could be launched.
RBC Capital Markets has a share price target of $58 on Aristocrat shares, compared with the current price of $47, implying potential upside of 23%.
Aristocrat is valued at $27.86 billion, and pays a dividend yield of 2%.
