Morgan Stanley asserts Aristocrat Leisure does not need to outperform to succeed in digital. The company’s land-based success and scale provide a competitive advantage, despite growth moderating in this area.
Morgan Stanley adjusts estimates to allow for top-line growth from stronger digital growth, eases back margins to account for digital’s lower margins and adjusts for a lower tax rate.
All up, estimates for earnings per share are reduced by -1% in FY19 and raised by 3% for FY20. Rating is upgraded to Overweight from Equal-weight and the target is raised to $35 from $29. Industry view: Cautious.
Sector: Consumer Services.
Target price is $35.00.Current Price is $29.19. Difference: $5.81 – (brackets indicate current price is over target). If ALL meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges – negative figures indicate an expected loss).