Light & Wonder shares (ASX: LNW) fell 8.17% to A$113.57 yesterday, placing the stock firmly at the bottom of the ASX leaderboard on the day. Thursday’s pullback was the sharpest setback in weeks for the company, with the stock now 17.64% lower over the past month of trading, as bulls look for support.
The move comes as news that the CEO of the social casino business, Josh Wilson is to step down, whilst also reflecting a positioning reset in a high-beta name that had been trading comfortably in the high-120s earlier this month,
The fundamental backdrop has genuinely improved, with second-quarter revenue rising a modest 2% to US$828 million, but net income jumped 26% to US$120 million and consolidated adjusted EBITDA climbed 9% to US$383 million.
What Lay Ahead
Looking to the analyst community for clues, the average price target on the street is A$164.71, ~40% up from yesterday’s close. Valuation metrics, with a trailing P/E around 26 falls to about 10.8 on forward estimates, with a PEG ratio near 0.3 suggesting analysts see earnings growth that is far from fully priced.
The technical setup is providing bears with plenty of ammunition. The price now sits below the 50-day average of A$121.23, with that average itself below the 200-day at A$130.60, a negative alignment that invites trend-following accounts to reduce exposure.
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The stock also punched through the lower Bollinger band at A$120.90 on a 20-day setup with band width around 9.1%, signalling an expansion in volatility and a short-term downside overshoot.
