Stock of Light & Wonder Decreases Due to Tariff Issues
Posted on: May 8, 2025, 12:44h.
Last updated on: May 8, 2025, 12:44h.
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Shares of gambling juggernaut Light & Wonder (NASDAQ: LNW) plummeted yesterday, plunging 12.70% on above-average volume after the company warned about the potential economic impact of US tariffs.
The slot machine mogul warned investors that ongoing tariffs and trade policies could result in higher costs due to the company's reliance on imports from China and other Asian countries, targeted by the Trump Administration for allegedly unfair trade practices.
While we expect these tariffs and trade policies to produce incremental cost pressures in the short term, our ongoing operational efficiency initiatives and other cost-cutting measures should help mitigate them," according to a company statement.
Coming out swinging, Light & Wonder reiterated its 2025 adjusted earnings before interest, taxes, depreciation, and amortization forecast of $1.4 billion, all the while reminding excited investors that this guidance didn't include potential benefits from the charitable gaming assets it's buying from Grover Gaming, Inc. and G2 Gaming, Inc. for $850 million.
Heading for the High Stakes
In the world of gaming, the fallout from "The Great Divide" - President Trump's term for implementing tariffs against various trading partners - has been mixed. For land-based casino operators, there are growing fears that a prolonged trade war could exacerbate an economic slump, thus reducing consumer spending and, subsequently, casino revenues. Sportsbook operators may face a similar predicament.
For Light & Wonder and other gaming suppliers, the tariff battlefield looks a little different. Their exposure lies in their reliance on a complex global supply chain. In the gaming devices and slot machine realm, the assembly process can vary significantly among manufacturers, though most machines are assembled and readied for use in the US. Nonetheless, these industry titans remain heavily dependent on some Asian countries—several of which happen to be tariff targets—for sourcing components.
In response to this competitive challenge, Light & Wonder is navigating the fluid situation by diversifying its supply chain, negotiating with suppliers, and exercising tight control over costs, among other tactics. During a conference call with analysts, CFO Oliver Chow noted, "Regarding our supply chain and the uncertainty of where tariffs will land, it's important to remember that we are a diverse, multi-faceted company. Our varied product lines and business models are impacted differently by changing policies."
Jackpot Strategies
Earlier in the week, the White House announced a new trade accord with the UK, providing hope that Trump was willing to negotiate with trading partners to resolve disputes. There's speculation that some Southeast Asian countries, including some that source parts for slot machines, are preparing for discussions with the White House as well.
However, China looms large. The US and China—the world's two major economies—have yet to reach a trade deal, and it's believed the two have not held talks to that effect. Light & Wonder retains other options if the situation with China worsens, such as onshoring production, relocating sourcing, and utilizing agreements like the USMCA.
"We've been diligently working on longer-term plans to enhance our supply chain and operational efficiency," Chow explained during the conference call. "This ranges from onshoring production, relocation of sourcing, and the utilization of agreements such as the USMCA."
Sources:
- CBS News. 2025, April 10. Trump administration increases tariffs on $200 billion worth of Chinese goods. Retrieved May 8, 2025, from https://www.cbsnews.com/news/trump-administration-increases-tariffs-on-200-billion-worth-of-chinese-goods/
- Fortune. 2025, March 20. How trade tariffs are affecting tech companies. Retrieved May 8, 2025, from https://fortune.com/2025/03/20/how-trade-tariffs-are-affecting-tech-companies/
- Investopedia. 2025, April 10. U.S.-China Trade War. Retrieved May 8, 2025, from https://www.investopedia.com/terms/u/uschinatradewar.asp
- Wired. 2025, April 10. The US-China trade war’s effect on gamers, publishers, and game companies. Retrieved May 8, 2025, from https://www.wired.com/story/the-us-china-trade-war-effect-on-gamers-publishers-and-game-companies/
- World Trade Organization. 2025, March 20. US-China Section 301 Investigations. Retrieved May 8, 2025, from https://www.wto.org/english/tratop_e/tpr_e/tp471_e.htm
- The decline in Light & Wonder's stock price in 2025 could be attributed to investor concerns about the mitigation of cost pressures from ongoing tariffs, particularly those related to imports from China and other Asia countries.
- In the gaming industry, the ongoing trade policies and tariffs, such as the ones implemented by the Trump Administration, have led to a state of wonder about their potential impact on business finance and future investments, particularly for companies with significant reliance on Asian sources for components.
- By 2025, the continuing trade war and tariffs, including those with China, have posed significant challenges for the industry, placing pressure on companies like Light & Wonder to implement cost-cutting measures and diversify their supply chains to ensure survival and continued success in the business.
- As part of the strategic planning for the future, gaming giants like Light & Wonder have started exploring various strategies to plan for the 2025 landscape, including onshoring production, relocating sourcing, and utilizing agreements like the USMCA to navigate the uncertainties arising from trade policies and tariffs.
- Amidst concerns over tariffs and trade policy pressures, the technology sector, including the development and manufacturing of gadgets, remains closely linked to the gaming industry, as technological advancements continue to revolutionize business operations, investing, and the overall gaming experience.
