Mizuho starts Light & Wonder stock with bearish note, cites limited growth catalysts
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On Tuesday, Mizuho initiated coverage on Light & Wonder (NASDAQ: LNW) stock, assigning an underperform rating and setting a price target of $83.00. The firm’s analysis suggests that, despite Light & Wonder’s strong management, the company’s stock is expected to underperform relative to its industry peers going forward.
A three-part thesis drives the underperform rating. Firstly, Mizuho points to limited remaining strategic alternatives or catalysts for Light & Wonder. Secondly, there is a perceived risk to the company’s financial projections as growth decelerates and as it reaches its targets, which could also affect interest from incremental buyers. Lastly, the firm suggests that there are better relative values to be found elsewhere in the market.
Mizuho’s price target of $83 for Light & Wonder is based on a sum-of-the-parts (SOP) valuation. This valuation corresponds to approximately 8.8 times the estimated 2025 EBITDA. The methodology behind the valuation reflects a cautious outlook on the company’s future financial performance.
The coverage initiation and the setting of the price target come as financial institutions provide their assessments of various companies’ market potentials. These evaluations serve as guidance for investors on the expected performance of stocks compared to the market and sector averages. Light & Wonder’s current positioning, according to Mizuho, indicates a potential underperformance, which is reflected in the underperform rating and the set price target.
InvestingPro Insights
Mizuho’s underperform rating for Light & Wonder (NASDAQ: LNW) is contrasted by some of the real-time data and InvestingPro Tips that highlight different aspects of the company’s financial health and market performance. The company boasts a robust gross profit margin of around 69.95% as of the last twelve months ending Q4 2023, indicating efficient operations and strong pricing power. Additionally, Light & Wonder has shown a notable revenue growth of 15.53% during the same period, suggesting that the company is expanding its business effectively.
InvestingPro Tips also reveal that Light & Wonder has experienced a high return over the last year, with the stock price total return at an impressive 86.99%. Moreover, the company’s liquid assets exceed its short-term obligations, which may provide a cushion against market volatility and unforeseen financial challenges. Nevertheless, it’s important to note that three analysts have revised their earnings downwards for the upcoming period, and the stock is trading at a high earnings multiple with a P/E ratio of 59.26, which could be a point of concern for value-focused investors.
For investors interested in a deeper analysis, there are additional InvestingPro Tips available, which can provide further insights into Light & Wonder’s financial metrics and market position. To explore these insights and make more informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With this tool, investors can access comprehensive data and tips to navigate the complexities of the stock market.
