Light & Wonder Inc. (LNW) is a cross-platform global games company with a focus on content and digital markets. The company’s portfolio of revenue-generating activities in its continuing operations primarily includes supplying game content and gaming machines, CMSs and table game products and services to licensed gaming entities; providing social casino and other mobile games, including casual gaming, to retail customers; and providing a comprehensive suite of digital gaming content, distribution platforms, player account management systems, as well as various other iGaming content and services. We initiate on Light & Wonder with a $135 per share fair value estimate, and a risk rating of High.
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. We expect it will prove difficult for Light & Wonder to capture material and maintainable share in the electronic gaming machine market. However, we do not expect the firm to cede share to smaller players either, as its research and development spending is multiples of most of its smaller competitors. Light & Wonder significantly simplified its business by divesting non-core lottery and sports-betting assets and is now a more focused entity with operations across social casino, iGaming, and EGMs. Research and development investment can be leveraged to drive game performance across all remaining business units and continuous product development allows Light & Wonder to maintain game quality and differentiate products from lower-end competitors.