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Why is the Aristocrat Leisure (ALL) share price rebounding today?

Posted: 19 May 2022 1:14 pm
News
ALL-shares-19May_1800x1000_Finder

Shares in the gaming giant have been under the pump in the recent past, losing nearly a third of their value over the last 6 months, but they're up during morning trading.

Gaming and slots machine business Aristocrat Leisure (ASX:ALL) is a welcome break in a sea of red on the ASX on Thursday. The stock was among the top trades on the bourse after rising more than 6% in early trade, despite a marketwide sell-off. At the time of writing, the shares were still up 4.3% at $32.97.

By comparison, other tech favourites such as Block (ASX: SQ2) and Brainchip Holdings (ASX: BRN) were down 3% and 5% respectively.

Why is the Aristocrat stock price climbing today?

Aristocrat Leisure posted encouraging half-year results on Thursday. Normalised net profit for the 6 months to 31 March jumped 41% to $580 million. Revenue for the first half rose 23% to $2.75 billion.

The company will pay a fully-franked interim dividend of 26 cents a share on 1 July.

The results smashed forecasts, with analysts expecting half-year profit to be between $525 million–$535 million. They also reflected a significant turnaround in fortunes for the gaming giant since 2020 when it was forced to cut staff, impose pay cuts and scrap its dividend in order to cope with the fallout from the COVID-19 lockdowns.

​​"Aristocrat delivered an impressive and resilient performance despite mixed operational conditions and challenges. We took comprehensive action to protect our people and business, while investing strongly to accelerate our growth strategy going forward," CEO Trevor Croker said in a statement to the ASX.

Investors were left even more impressed after Aristocrat outlined plans to return up to $500 million to investors through an on-market share buyback.

Growth plans

Aristocrat has been in the spotlight over the past year because of its $5 billion bid for the UK-based online gaming software supplier Playtech. Investors led by former Playtech boss Tom Hall racked up a 28% stake to kill the deal, despite Aristocrat securing the support of Playtech's board.

The Australian firm raised $1.3 billion for the failed bid and now says its will go ahead and develop its real money gaming strategy with ambitions to become the global leader in the growing online gaming sector.

"We are accelerating the implementation of our 'build and buy' strategy to scale in online Real Money Gaming, which provides further channels for us to distribute our world-leading content," Mr Croker said on Thursday.

"Our ambition is to be the leading gaming platform in the global online RMG industry, and we anticipate being live with i-Gaming products in 2 jurisdictions in the US by the end of calendar year 2022."

That forecast was underlined by the company investing $313 million in game design, development and technology over the first half, representing 11.4% of group revenue.

Analysts are backing the growth prospects, with both Citi and Macquarie keeping a price target of $44 a share on the Aristocrat stock in recent days, indicating significant upside from current levels.

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