Boyd Gaming Revenue Could Pop on Regional Casino Strength

Boyd Gaming (NYSE: BYD) stock is on a tear this year, soaring 20.92%, but there could be upside to that performance due to strength in regional casinos.

Boyd FanDuel
Boyd Gaming’s Fremont Hotel Casino in downtown Las Vegas. A JPMorgan analyst is bullish on Boyd stock. (Image: Vegas Eater)

In a note to clients Monday, JPMorgan analyst Joseph Greff reiterated an “overweight” rating on the Orleans operator with a $75 price target. That implies upside of 13.65 from today’s close. As is the case with so many casino equities, Boyd’s share price could be driven more by the broader economy than its own strong fundamentals.

While we continue to see BYD’s share price (as well as the rest of our coverage universe’s) trading more on macro trends (versus company-specific ones) in the near term, we see BYD as (at least) a relative outperformer within our U.S. gaming universe,” wrote Greff.

The JPMorgan analyst also applauded Boyd for its strong balance sheet and commitment to shareholder rewards, including share buybacks. At the end of last year, the operator had $283.5 million cash on hand. In February, it announced an almost 7% increase to its quarterly dividend.

Regional, Las Vegas Duopoly Benefits

Boyd runs 10 gaming venues in its home market, including Aliante, California, Cannery, Fremont, Gold Coast, Jokers Wild, Main Street Station, Sam’s Town, Suncoast, and The Orleans.

Greff called the coveted Las Vegas locals market “effectively a duopolistic market with a relatively better demand environment.” That implied duopoly is Boyd and rival Red Rock Resorts (NASDAQ: RRR) and it’s hard to argue with that assertion as those two firms combine to run more than 20 casinos in the Las Vegas Valley.

The major difference between the two, however, is Boyd has operations in several states outside of Nevada — a trait not sported by Red Rock. That’s to the benefit of the former because Greff expects Boyd will post first-quarter revenue of $440 million from its Midwest, South and West operations, up from a prior forecast of $414 million.

The analyst also modeled $14 million in sales from Boyd’s digital unit and $15 million in management fees tied to the company’s management agreement with a tribal casino in Northern California.

Other Boyd Benefits

The Suncoast operator continues sporting healthy operating margins and robust free cash flow-generating capabilities, which are being directed to investors in the form of buybacks and dividends. Last year, Boyd allocated $600 million to shareholder rewards, buying back $107 million of its stock in the fourth quarter alone. The company said it has $239 million remaining on previously announced repurchase programs.

As for the operator’s Las Vegas locals and downtown casinos, that group is proving steady though not necessarily overwhelming at the moment.

That segment is “undemanding … nor have we changed our 2Q23-through-2024 estimates and still see a relatively healthy and stable gaming consumer, with the only legitimate nit being the state of the low-end consumer,” concluded Greff.

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