The timing and amount of Light & Wonder Inc’s settlement with Aristocrat Leisure Ltd over the alleged infringement by slot product “Dragon Train” of Aristocrat’s trade secrets was a positive surprise to the market and a removal of a “litigation overhang”, says JP Morgan Securities Australia Ltd.
But any re-rating of Light & Wonder’s stock would require the company to make clear its delivery toward its stated financial-year 2028 targets, added the institution in a Monday memo.
Casino equipment and online games provider Light & Wonder agreed to pay fellow gaming technology group Aristocrat US$127.5 million, according to a Monday joint statement issued via the Australian Securities Exchange, where each is listed.
JP Morgan stated in response: “The quantum (US$127.5 million; circa AUD190 million) and timing (expert discovery was set to close on March 16, 2026) of Light & Wonder’s settlement with Aristocrat has surprised the market.”
Its analysts including Don Carducci and Michael James added: “We expect the US$127.5 settlement to be treated as a significant item in first quarter 2026 (US$100.7 million after tax) with the cash payment to be made in the same quarter.”
Such cash outflow would mean higher net interest costs for Light & Wonder and meant JP Morgan’s estimate for Light & Wonder’s 2026 net profit after tax adjusted (NPATA) was now US$637.7 million. That was a 0.6-percent revision from the institution’s previous forecast of US$641.7 million.
“To reflect the removal of the litigation overhang, we have reduced our WACC [weighted average cost of capital] from 9.2 percent to 9.0 percent, while rolling forward our model to December 31, 2026,” said JP Morgan.
It added that had “led to a 10-percent increase in our price target to AUD161 per share.”
Despite the removal of the litigation threat, the JP Morgan analysts said it remains “neutral” on Light & Wonder’s shares.
The analysts noted: “To see a multiple re-rate from here, we believe the company needs to deliver towards its financial year 2028 targets, de-lever the balance sheet and build out depth in its hold and spin game portfolio.”
