Light & Wonder: Initiating Coverage as EGMs Rule the Roost

We initiate on Light & Wonder with a USD 87 (AUD 135) per share fair value estimate, a Morningstar Uncertainty Rating of High, and a Capital Allocation Rating of Standard. We do not think Light & Wonder benefits from an economic moat. While stringent regulatory licensing requirements in major markets create barriers to entry for new players, the market is already highly competitive, and we do not believe Light & Wonder has garnered the appropriate intellectual property or brand assets to enjoy excess economic returns. Our valuation implies a fiscal 2023 price/earnings ratio of 36 and an enterprise value/EBITDA of 11. Our discounted cash flow model uses a 7.8% weighted average cost of capital.