Last Update 13 Dec 25
Fair value Increased 1.13%LTMC: Higher Earnings Multiple Will Drive Future Upside Potential
Narrative Update on Lottomatica Group
Analysts have modestly raised their price target on Lottomatica Group to approximately EUR 27.24 from around EUR 22.44. This reflects a slightly higher fair value estimate and future earnings multiple, despite only marginal adjustments to discount rate, revenue growth, and profit margin assumptions.
Analyst Commentary
Bullish analysts interpret the higher price target as confirmation that the market may have been underestimating Lottomatica Group's earnings power and resilience. The revised valuation framework suggests confidence in the company's ability to execute on its growth strategy despite only incremental changes to underlying assumptions.
Bullish Takeaways
- The price target increase implies upside potential from current trading levels, indicating analysts see the stock as attractively valued relative to its earnings trajectory.
- Maintaining a positive rating alongside the higher target underscores confidence in management's execution capabilities and the visibility of medium term growth drivers.
- The upward revision, despite only modest tweaks to revenue and margin forecasts, signals belief that the risk profile has improved or that prior assumptions were conservative.
- Analysts appear to be factoring in a more supportive operating environment, which could sustain cash flow generation and justify a higher earnings multiple over time.
Bearish Takeaways
- The adjustment to the price target is relatively modest, suggesting limited additional rerating potential if execution or market conditions disappoint.
- Dependence on incremental improvements in growth and margins leaves little room for missteps, which could quickly erode the valuation premium implied by the new target.
- The lack of major changes to core assumptions highlights that upside is more about sentiment and multiple expansion than a step change in fundamental expectations.
- Bearish analysts may argue that the current valuation already prices in much of the anticipated growth, reducing the margin of safety for new investors.
Valuation Changes
- The Fair Value Estimate has risen slightly from €28.21 to approximately €28.53, indicating a modest uplift in intrinsic value.
- The Discount Rate has increased marginally from about 12.66 percent to roughly 12.79 percent, reflecting a small uptick in the assumed risk profile.
- Revenue Growth has edged down fractionally from around 5.66 percent to about 5.65 percent, implying a nearly flat adjustment to top-line expectations.
- The Net Profit Margin has fallen slightly from roughly 16.53 percent to around 16.45 percent, signaling a minor reduction in projected profitability.
- The Future P/E has risen modestly from about 23.37x to approximately 23.84x, suggesting a somewhat higher valuation multiple applied to forward earnings.
Key Takeaways
- Expansion in digital gaming, data-driven personalization, and platform upgrades are driving higher margins, retention, and structural revenue growth for Lottomatica.
- Regulatory-driven market consolidation and acquisitions are set to increase market share, strengthen competitiveness, and enhance long-term earnings quality.
- Overdependence on a shrinking traditional market, rising compliance demands, and high financial risk threaten long-term growth unless digital transformation and diversification efforts succeed.
Catalysts
About Lottomatica Group- Operates in the gaming market in Italy.
- The successful completion of the PWO migration is expected to drive a near-term recovery and sustained improvement in online market share and user engagement, leveraging a more advanced technology platform and historically higher conversion and retention rates-supporting both revenue growth and higher EBITDA margins.
- The upcoming consolidation opportunity from Italy's new online concession framework allows Lottomatica to capture an additional 7-10% of the total market share, with 2% already secured through deals, presenting a structural step-up in the company's addressable revenue base and long-term earnings potential.
- Ongoing bolt-on acquisitions and market share "roll-ups" resulting from the market's regulatory transition are likely to strengthen Lottomatica's competitive moat and deliver margin-accretive synergies, which should positively impact EBITDA and net margins as consolidation continues into 2025-26.
- The shift in mix toward higher-growth, less volatile digital gaming segments (especially iGaming), underpinned by rising digital adoption and consumer preference for integrated entertainment, is structurally increasing Lottomatica's top-line momentum and margin profile as digital penetration expands.
- Increased use of data analytics and customer personalization is yielding better retention and monetization rates, meaning Lottomatica's investments in digital innovation and user experience are expected to drive sustainable increases in ARPU and long-term earnings quality.
Lottomatica Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Lottomatica Group's revenue will grow by 7.5% annually over the next 3 years.
- Analysts assume that profit margins will increase from 6.5% today to 15.9% in 3 years time.
- Analysts expect earnings to reach €434.8 million (and earnings per share of €1.76) by about September 2028, up from €142.8 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €482.2 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.7x on those 2028 earnings, down from 39.8x today. This future PE is lower than the current PE for the IT Hospitality industry at 54.5x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 13.16%, as per the Simply Wall St company report.
Lottomatica Group Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Lottomatica's heavy reliance on the Italian market exposes it to country-specific economic and regulatory risks, such as potential regulatory tightening or tax increases, which could limit revenue growth and create future earnings volatility.
- The traditional retail gaming franchise segment is experiencing a persistent decline in GGR (gross gaming revenue), particularly in AWPs, which is expected to continue; this structural headwind may weigh on overall company revenues and lead to margin compression if not offset by digital growth.
- High capital expenditure requirements for technology upgrades, bolt-ons, and integration activities increase financial risk and could compress net margins if anticipated synergies or market share expansions fall short, especially in a competitive digital landscape.
- Demographic changes, especially declining participation by younger generations in traditional gambling products, may shrink the future customer base and could negatively impact long-term revenue sustainability.
- Increasing regulatory scrutiny across Europe and rising ESG (Environmental, Social, Governance) considerations-such as responsible gambling efforts and potential restrictions on advertising-could lead to higher compliance costs, reputational risks, and ultimately constrain profitability and future earnings growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of €27.126 for Lottomatica Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €32.0, and the most bearish reporting a price target of just €22.44.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €2.7 billion, earnings will come to €434.8 million, and it would be trading on a PE ratio of 22.7x, assuming you use a discount rate of 13.2%.
- Given the current share price of €22.56, the analyst price target of €27.13 is 16.8% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.