Light & Wonder Earnings: Resonating Content Drives Strong Results Across All Segments

We lift our fair value estimate for shares in no-moat Light & Wonder by 8% to USD 97/AUD 150 on the back of higher earnings forecasts for the core gaming business. Underlying 2023 EBITDA lifted 22% to USD 1.1 billion, about 3% ahead of our forecast. The firm enjoyed double-digit revenue and earnings growth across all segments by leveraging content research and development spending across gaming, SciPlay, and iGaming. R&D investment is necessary for a healthy pipeline of new products, software developments, and platform enhancements. However, we do not think Light & Wonder has carved an economic moat. While hit games can come down to chance, we do not believe Light & Wonder has garnered the appropriate intellectual property or brand assets to enjoy excess economic returns over the long run, particularly given stiff competition from market leader Aristocrat.