Up 8% this week, brokers are bullish about the Aristocrat (ASX:ALL) share price

The Aristocrat (ASX: ALL) share price is flying higher for a second day after its profit upgrade. Here’s what brokers are thinking.
The post Up 8% this week, brokers are bullish about the Aristocrat (ASX:ALL) share price appeared first on The Motley Fool Australia. –

Bull market

The Aristocrat Leisure Limited (ASX: ALL) share price continues to ride the momentum of yesterday’s upgraded half-year earnings.

Reaching a new record high of $40.63 this morning, the Aristocrat share price is up 3.8% at the time of writing, trading at $40.41.

What do brokers say about the Aristocrat share price?

First off the blocks is Citi, which maintains its buy rating and has increased its target price from $40.60 to $44.50. The broker says that the gaming and gambling machine company’s recovery has been much faster than expected.

Citi believes Aristocrat’s business is being propelled by the reopened and stimulated United States economy. This has prompted the broker to pull forward its recovery forecast, upgrading FY21 net profit estimates by 12%. 

Credit Suisse had a similar reaction, with Aristocrat’s first-half operating earnings well ahead of its estimates. As a result, the broker upgraded its FY21 net profit estimates for the company by 24%. 

Despite retaining an outperform rating and increasing its target price from $38.00 to $41.25, the broker said that this positive situation might be temporary given the amount of stimulus injected into US and Australian economies. 

Morgan Stanley said that the company’s first half profit of $412 million was a significant 43% ahead of its forecasts. The broker believes Aristocrat’s update suggests that its land-based business is recovering well ahead of expectations, while its digital business must have also grown against the prior corresponding period. Despite the strong update, the broker retained its target price of $38.00 and an overweight rating. 

UBS notes that the outright gaming machine replacement market is still down 40% to 45%, meaning Aristocrat’s increase in market share should be taken positively.

The broker believes that around 90% of participation gambling machines are switched on despite potential disruptions in the US. The strong update has given the broker the confidence that Aristocrat could deliver $1.1 billion in profit for FY22. 

UBS retained a buy rating while lifting its target price from $35.50 to $42.50. 

Macquarie was the only broker to retain a neutral rating while lifting its target price from $32.00 to $39.00. The broker’s net profit forecasts were slightly less optimistic than UBS, forecasting $843 million in FY21.

Macquarie believes the catalyst for the upgrade was more margin-driven than anything revenue-related. 

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Up 8% this week, brokers are bullish about the Aristocrat (ASX:ALL) share price appeared first on The Motley Fool Australia.

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