No Liberation for Gaming Supplier Stocks as Tariffs Take Hold

• Gaming supplier stocks confront specter of reciprocal tariffs
• Light & Wonder viewed as among most vulnerable, according to Stifel

Gaming equities were savagely repudiated last week as investors digested “Liberation Day” — President Trump’s plan to implement tariffs against a plethora of US trading partners. Shares of suppliers and device manufacturers weren’t spared, and things could get worse for the group before they get better.

In a new report, Stifel analyst Jeffrey Stantial points out that gaming suppliers are “directly exposed” to global supply chains, which could be crimped as the result of the trade levies, noting potential adverse free cash flow (FCF) effects vary from supplier to supplier.

While the situation remains in flux, our analysis suggests potentially meaningful unmitigated FCF impact from initial reciprocal tariffs for slot manufacturers while also potentially impacting replacement sales via operator uncertainty, consumer pullback and/or geopolitical tensions,” wrote Stantial.

In the gaming device/slot machine industry, how manufacturers assemble devices varies from company to company, though most machines are put together and readied for use in the US. However, these firms are still heavily reliant on some Asian countries — several of which are tariff targets — for sourcing of components.

Light & Wonder Could Be Vulnerable to Tariffs

Shares of Light & Wonder (NASDAQ: LNW) tumbled 10.45% last week as the slot machine giant updated investors regarding litigation brought by rival Aristocrat Leisure, but part of that slight may have been attributable to Liberation Day.

“While we have previously noted LNW’s upcoming Investor Day and new long-term financial targets as potentially helping stabilize sentiment, we believe investors are unlikely to show much confidence in projections from any directly or indirectly impacted business in the current environment,” adds Stantial.

Conversely, International Game Technology (NYSE: IGT) was dubbed a “baby in the bathwater” opportunity by the analyst because it’s selling its slots business, making it a lottery-focused outfit.

Gaming Supplier Stock Universe Shrinking, But …

Given the current market calamity, there’s not much of a silver lining, but the universe of gaming supplier stocks is poised to shrink. PlayAGS (NYSE: AGS), which Stantial says has solid fundamentals, is being taken private by Brightstar Capital Partners while IGT’s slot machine unit is being combined with Everi (NYSE: EVRI) into an entity that will be acquired by Apollo Global Management (NYSE: APO).

“Still, we believe the multiple paid for these assets remains reasonable despite share loss since announcement, while reiterating Apollo’s historical interest in owning IGT Gaming & the compelling industrial logic in combining EVRI FinTech with IGT systems,” concludes the analyst. “Hence, we still expect the deal to close as structured, though monitoring closely amidst unprecedented uncertainty.”