Now could be the time to buy Aristocrat Leisure Ltd (ASX: ALL) shares.
That's the view of analysts at Goldman Sachs, which are feeling bullish about the ASX 200 tech stock.
According to a note, the broker has upgraded the gaming technology company's shares on the belief that it is going to deliver "strong and certain earnings growth" in the coming years.
There are three key reasons for its positive view on the ASX 200 tech stock. It explains the first as follows:
(1) Increased confidence in earnings growth: ALL's market dominance was reinforced with record NA installs in FY24, and we are increasingly confident ALL can grow share beyond >40%. Market share ceilings remain a key debate, but we believe ALL's leading R&D investment (2x LNW), enabled by its balance sheet strength, will drive the development of high-indexing games ahead of peers. We also note its successful IP defence around Dragon Link.
Another reason is greater certainty in digital. It adds:
(2) Greater certainty in digital: ALL will be returning to its core competency of slots content following the proposed sale of Plarium. The broader category remains ex-growth, but we expect Pixel's social casino portfolio can deliver +2-3% topline p.a. with land-based synergies driving share gains.
Finally, the company's overweight exposure to the US market is being seen as a positive. Goldman explains:
(3) Positive exposure to US (>80% of rev.): With our global economists seeing solid disposable income growth in 2025, we expect this will likely support casino/slots expenditure. Further, the AUD has fallen -10% since Sep-24 and hence we update our AUD/USD FX assumptions to 0.64 (from 0.66), driving +2-3% EBITA upgrades.
The note reveals that Goldman has upgraded Aristocrat's shares to a buy rating with an improved price target of $78.00.
Based on its current share price of $68.95, this implies potential upside of 13% for investors over the next 12 months.
A modest 1.5% dividend yield is also forecast for FY 2025, boosting the total potential return to approximately 14.5%.
Goldman then concludes:
We upgrade ALL to Buy from Neutral, with our revised 12m TP of A$78 implying +13% upside. In line with our 2025 TMET Outlook, our positive view is predicated on our preference for high quality companies that have a track record of delivering strong and certain earnings growth.
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