The company's adjusted earnings before interest, taxes, depreciation, and amortization may be negatively impacted by about $70 million as a result of the preliminary injunction forcing Light & Wonder (NASDAQ: LNW) to stop selling and leasing the "Dragon Train" line of slot machines.

In a recent report to clients, Macquarie analyst Chad Beynon stated as much, which is consistent with the business's expectations. Tuesday's verdict was discussed by Light & Wonder, who informed investors that "Dragon Train" devices accounted for less than 5% of its $1.4 billion 2025 EBITDA outlook.

The US District Court for the District of Nevada granted Aristocrat Technologies a preliminary injunction on Tuesday, requiring L&W to halt sales of "Dragon Train" slots, the majority of which are offered in Australia. This decision caused shares of L&W to plummet. The home nation of Aristocrat filed the lawsuit, claiming that the L&W game is very similar to its own "Dragon Link" machines.

Light & Wonder's stock barely recovered from Tuesday's losses with a 1% rise on Wednesday. However, the firm informed investors that it is looking for clarification regarding the injunction and that it will explore legal options to possibly address the matter.

Not Enough Near-Term Catalysts for Light & Wonder

Following the Tuesday decline, a few analysts contended that Light & Wonder's valuation case had been reset since the company had become pricey following a protracted upswing. That might not be sufficient on its own to enable a quick recovery.

"Despite marginal earnings revisions, LNW’s de-rating likely reflects risks on the outcomes from litigation events, management’s credibility, and possible medium-term impacts to volumes,” observed Beynon.

Although there aren't many short-term catalysts on the horizon, he maintained his "outperform" rating for the company. His $117 price objective for L&W implies a 27.7% increase from Wednesday's closing price. But the business is facing lawsuits on other fronts, which might prevent the stock from rising quickly.

“Further to litigation with Aristocrat, LNW also faces litigation from Evolution, with allegations relating to copying math files and payout structures for table games,” added Beynon.

"Dragon Train" is well-liked yet might have issues

The "Dragon Train" slots are well-liked in Australia, and prior to the injunction, the series was seen to have the potential to help L&W increase its market share there. But Aristocrat's attention was drawn to "Dragon Train's" popularity, and now L&W may lose both ways.

Because L&W has a wide range of products, it is not overly reliant on "Dragon Train." This is advantageous because Aristocrat may take severe legal action.

“’Dragon Train’ is a top-performing game franchise and has been subject to legal proceedings by Aristocrat since March 2024. We estimate there are ~2k gaming ops installs, generating about US $30m+ AEBITDA, and outright sales that generate about US$40m EBITDA. If successful at trial, we think Aristocrat will want ‘Dragon Train’ to be removed, rather than receiving a royalty,” concluded Beynon.