“Macro schmacro,” enthused Truist Securities analyst Barry Jonas about Monarch in a July 16 investor note. He raised his price target on the Buy-rated stock from $105 per share to $120 apiece.
Jonas was impressed by Monarch’s beating cash-flow estimates by 15 percent in its second-quarter earnings report, released the same day as his note. Monarch was, he wrote, “riding the regional wave, which has been trending strong. … Reno renovations are now complete and finally gaining share, while Black Hawk continues to outperform.”
Macroeconomic issues remained, he allowed, but Monarch “has still not seen any actual impact with its mid-upper end customer resilient.” Jonas expected similar second-quarter reports from other regional operators, especially Station Casinos.
Of Monarch’s Reno-area Atlantis casino, Jonas wrote, “While the competitive environment remains elevated, Atlantis’s luxury offering enables the company to push rates,” which have climbed $20 to $25 higher per room night.
As for Monarch Black Hawk in Colorado, leadership “continues to highlight Black Hawk’s increasing market share, particularly amongst the mid-to upper end guests in the Denver and Boulder regions.”
It was also targeting Denver customers, in particular, to try and get them to eschew Las Vegas visits. “Similar to Reno, management remains confident in its property, despite the promotional environment, given its best-in-class offering.”
Low-end business continued to be weak, Jonas reported, but he raved about the current state of the economy, writing, “Employment levels are healthy, with the stock market at all-time highs, which management believes are the key factors in driving its revenues.” Also, Monarch’s target customer was a mid- to high-end player, ameliorating the low-end softness.
Monarch, a two-casino company, was being patient with regard to merger or acquisition activity, Jonas said. He added, “The M&A environment remains challenged, but [Monarch] will continue to evaluate gaming and even non-gaming targets as well.”
Jefferies Equity Research analyst David Katz also posted a rave review. “The better-than-expected results are driven by the early impact from the Reno rooms renovation, which should continue to ramp going forward,” he diagnosed. “With the addition of the momentum in Black Hawk, the company is uniquely positioned to continue generating same-store growth.”
Although Katz maintained a Hold rating on MCRI shares, he raised his price target from $84 per share to $96. He attributed his caution to the absence of another expansion project.
Katz, who admitted to being surprised by the Monarch results, said they were aided by economic tailwinds in Reno, which were offset somewhat by new momentum in California tribal casinos. Monarch, he added, “projects confidence that Black Hawk should continue to gain market share, given its positioning as the premium property in the underpenetrated Denver market.”
