Analyst issues Buy rating for GLPI, Hold for VICI

Sunday, January 12, 2025 10:37 AM
Photo:  Courtesy Vici Properties
  • Buck Wargo, CDC Gaming

Deutsche Bank released its 2025 stock outlook for GLPI and VICI Properties, giving the former a Buy rating and a Hold for the latter.

GLPI, which has been trading in the mid-to-upper $40s, has a $54 price target, according to analyst Carlo Santarelli. VICI has a $31 price target. VICI has traded in the upper $20s.

“While a meaningful acceleration in the transaction market likely requires support from broader macro conditions, GLPI’s ability to differentiate itself in 2025 stems largely from its pipeline and the ability to execute the pipeline,” Santarelli said. “In addition to the structured pipeline, we believe GLPI has considerable ongoing dialogue with a slew of tribal entities. We think incremental tribal announcements in 2025 could go a long way in furthering the notion that this could be a longer-term attractive opportunity for GLPI in the eyes of investors, which would presumably expand the trading multiple. Executing on the Penn or Bally’s Lincoln transactions in 2025 would provide upside to forecasts.”

Regional gaming performance has slowed, though GLPI coverage remains “healthy and comfortably” above escalator levels for most of the company’s material leases, with escalator coverage thresholds, Santarelli said. He added, however, they’re projecting escalators for 2025 and beyond, “a continued malaise in regional gaming when coupled with continued expense creep would put some escalators at risk and thus cause shortfalls to our forecasts.”

At current levels, GLPI trades at a 6.1% yield on its $3.04 annual run-rate dividend. Santarelli called this an attractive yield, given the relatively low volatility of the stock and the valuation discount relative to industry peers.

“Looking ahead, we believe GLPI is well positioned to grow the dividend at a 4% CAGR, while maintaining financial leverage and its dividend payout ratio,” Santarelli said. “As such, we see a likely dividend increase in the first half of 2025 and we believe this can serve as a positive catalyst, as it further highlights the attractiveness of the dividend, relative to peers.”

Over the last 18 months, despite a dearth of traditional sale-leaseback transactions, VICI has been active, moving the ball forward with accretive transactions, Santarelli said. While capital markets have to cooperate, he believes a return to traditional sale-leaseback transactions within gaming will go a long way toward providing a catalyst for VICI shares in 2025.

“Shares have been largely range-bound and will remain so in the absence of deals that improve the current AFFO growth trajectory, which we believe amounts to a 2% CAGR through 2026.”

Though the loan book represents only 4% of cash net revenue, Santarelli believes “investors are likely paying a lower multiple for these finite streams” and why Deutsche Bank believes traditional deals are likely to be of greater importance going forward.

While the largest boosts for VICI stemming from CPI- linked escalators are likely in the rearview for the foreseeable future, CPI-linked escalators are still likely to provide some benefit for VICI in 2025 and beyond, Santarelli said.