Posted on: September 24, 2024, 02:27h.
Last updated on: September 24, 2024, 02:27h.
Shares of Light & Wonder (NASDAQ: LNW) experienced a significant drop after a court granted Aristocrat Technologies a preliminary injunction related to Light & Wonder’s “Dragon Train” series of slot machines.
Following the injunction by the U.S. District Court for the District of Nevada, Light & Wonder saw a nearly 19% decline in late trading with trading volume exceeding the daily average by over 50%. Aristocrat, based in Australia, filed the lawsuit in March, alleging similarities between L&W’s “Dragon Train” slots and its own “Dragon Link” games.
(Aristocrat) is extremely likely to succeed in demonstrating L&W misappropriated Aristocrat’s trade secrets in [L&W’s] development of Dragon Train,” according to Judge Gloria Navarro’s ruling.
The Dragon family of games by L&W had gained popularity among Australian bettors, with analysts suggesting potential earnings growth due to the new series. However, the company faced legal challenges earlier this year in Australia, where Aristocrat obtained pre-suit discovery against L&W and is now considering legal action against its rival in its home country.
Light & Wonder Affirms Earnings Guidance
Despite the legal issues, Light & Wonder restated its 2025 EBITDA guidance, expressing disagreement with Navrro’s ruling and commitment to defending itself.
“Light & Wonder reaffirms its 2025 $1.4 billion Targeted Consolidated adjusted EBITDA,” the company stated. “We anticipate continued strong growth in all our businesses. The Company is implementing several key initiatives to mitigate the immediate impact and any ongoing business disruptions from the recent order.”
L&W clarified that Dragon Train games were projected to contribute less than 5% of the $1.4 billion, emphasizing its diverse range of offerings beyond the Dragon Train series. The company highlighted its successful research and development efforts, indicating that its financial performance is not dependent on a single title.
“Light & Wonder holds the number one share and performance position overall for top new sold games and has the leading performing game in all 5 sale categories in North America,” the Las Vegas-based company added. “Additionally, Light & Wonder boasts 8 of the top 25 premium leased and wide-area progressive parent theme games.”
Analysts Evaluate Short-Term Prospects for L&W
As analysts assessed the implications of Navarro’s ruling, some viewed the decision as unexpected. Jefferies predicted that L&W would seek clarification on whether it can continue using the “Dragon Train” slots.
Analyst David Katz noted that prior to the ruling, L&W’s stock was deemed expensive due to growth initiatives, suggesting a potential reset of expectations post the court decision. Katz indicated that the stock’s decline on Tuesday may be an overreaction.
“We anticipate the coming days and weeks will provide clarity on the impact of the case and whether the market has overreacted,” Katz observed.