Aristocrat does not report in this cycle (March yearend) however they provided a trading update at their AGM which was void of an upgrade, which many in the market were expecting, triggering a sharp pullback in the share price. Guidance was more heavily weighted to the second half, a similar story to ING, while ongoing investment in Interactive weighed on near-term earnings expectations.
To MM, however, this was far from a structural negative. Industry data indicates gaming machine demand remains robust, Aristocrat continues to gain share in North America, and its installed base is expanding — underpinning a growing stream of high-margin, recurring daily fee revenue.
Importantly, the stock is now trading at a meaningful discount to its historical multiples, despite still delivering double-digit earnings growth and maintaining one of the strongest balance sheets on the ASX.
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Aristocrat Leisure Ltd (ALL) PE Valuation over the last 5-years
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Aristocrat Leisure Ltd (ALL) PE Valuation over the last 5-years
The sell-off looks overdone to MM with its Installed base growth remaining intact, North American gaming trends still strong, the recent de-rating appears driven more by market rotation than fundamentals, and the stock now trades at a discount to its long-term averages.
- ALL is getting sold down along with the high growth and “AI Disruption Trade” but we believe its gone too far.
MM is bullish towards ALL around $47
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