Light & Wonder Earnings: Better-Than-Expected Growth in Leased Machines

We lift our fair value estimate for no-moat Light & Wonder by 7% to USD 104 (AUD 160) per share. The increase is in roughly equal parts due to an increase in our earnings forecasts and time value of money. Second-quarter fiscal 2024 underlying EBITDA rose 17% on the prior corresponding period, or PCP, to USD 330 million. The better-than-expected result was driven by strong performance in the core gaming market, the majority of Light & Wonder's earnings. We lift our full-year forecast by 3% to USD 1.2 billion—chiefly an upgrade to our estimate for the more durable installed base of leased machines. As leased machine revenue is relatively durable, we expect the higher installed base to also benefit later years. We lift our fiscal 2025 and 2026 EBITDA forecasts by 3% and 2%, respectively. Shares in Light & Wonder currently trade around fair value.