Aristocrat Leisure Ltd (ASX: ALL) could be a must-buy ASX 200 share according to analysts at Goldman Sachs.
And with the gaming technology company's half-year results on the horizon, the broker is urging investors to buy its shares before it's too late.
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What is Goldman saying about this ASX 200 share?
According to a note out of the investment bank this morning, its analysts have reiterated their buy rating and $45.70 price target. Importantly, the broker has also kept Aristocrat on its coveted conviction list.
These are the shares that Goldman feels have a combination of big potential returns and a high likelihood of realising this potential. It said:
Based on the current Aristocrat share price of $38.69, this implies potential upside of 18.1% for investors over the next 12 months. And if we throw in the expected 2% dividend yield, the total potential 12-month return stretches beyond 20%.
Why is the broker so bullish?
Goldman has been looking at how this ASX 200 share's rivals have been performing and believes it points to a strong first-half in the key Americas region. It said:
Key listed gaming peers in the US have reported 1Q23 results across the land-based space over the past couple of weeks. Common themes across all results were continued strength in topline growth and shipments, i.e. flagging strong industry growth for the quarter, except where company specific factors were in play. For ALL, we expect the Americas division to report c. 18.2% growth yoy for 1H23.
And while the broker acknowledges that there are some short-term concerns over the performance of its Pixel United (digital) business, it isn't enough to put Goldman off. Particularly given its diverse business and attractive valuation. It concludes:
Feedback from recent investor conversations shows that there remains strong interest in the name, especially on the iGaming opportunity, although there remains divided opinions on how quickly this becomes a meaningful part of the business. Outlook for Pixel United continues to be the key area of concern for investors.
We view ALL as offering the most diversified growth opportunities in the ANZ Gaming space with a strong balance sheet and at attractive valuation multiples. We are Buy rated (On CL) on ALL with a 12m Target Price of A$45.70 and offering a total return of +20.6%.
