Broker says Aristocrat share price is great value with 27% upside

gaming asx share price rise represented by slot machine paying jackpot

gaming asx share price rise represented by slot machine paying jackpotIt has been a disappointing year so far for the Aristocrat Leisure Limited (ASX: ALL).

Since the start of 2022, this gaming technology company’s shares have lost a quarter of their value.

Where next for the Aristocrat share price?

While the Aristocrat share price performance has been very disappointing for shareholders, it could prove to be a buying opportunity for others.

That’s the view of analysts at Morgans, which have recently named the company among its top picks on the Australian share market.

According to the note, the broker has an add rating and $43.00 price target on its shares. Based on the current Aristocrat share price of $33.91, this implies potential upside of 27% for investors over the next 12 months.

What did the broker say?

Morgans notes that Aristocrat has a leadership position in two growing markets and is generating significant recurring revenue.

Pleasingly, the broker expects this to continue and is tipping its pokie machine and digital businesses to continue winning market share. It explained:

ALL is a global market leader in the rapidly growing land-based gaming and mobile gaming industries. It has delivered revenue growth of 17% pa over the past five years and 80% of revenue in FY21 was recurring. We expect ALL to continue to take market share in all its product segments. Demand for its gaming machines and digital games is resilient to economic cycles.

Morgans also highlights that the Aristocrat share price has derated to a very attractive level. This is despite its positive outlook and very strong balance sheet, which provides it with M&A opportunities even after its recently announced share buyback.

The recent underperformance of the shares may have been a function of concern about ALL’s exposure to Ukraine, although it has recently stated that 75% of its staff there have relocated to safer locations and there is no material impact on earnings.

The underperformance means, however, that ALL’s 1-year forward P/E has derated to less than 20x from a high of 30x last September. With $3.3bn of currently available liquidity, ALL has significant funding capacity for growth, even after the buyback. It has a stated ambition to build a meaningful presence in the rapidly growing online real money gaming segment, which we believe may be achieved both through organic investment and inorganic acquisitions.

The post Broker says Aristocrat share price is great value with 27% upside appeared first on The Motley Fool Australia.

Should you invest $1,000 in Aristocrat right now?

Before you consider Aristocrat, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Aristocrat wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/q5OVdvU

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s