Ahead of earnings season, Bank of America Securities released a note to investors ranking the stocks of all the major operators on the Las Vegas Strip prior to fourth-quarter 2024 earnings reports.
Boyd Gaming, Churchill Downs, DraftKings, and Vici Properties were listed as Buy, GLPI and Sportradar as Underperform, and Caesars Entertainment, Las Vegas Sands, MGM Resorts International, Penn Entertainment, Red Rock Resorts, and Wynn Resorts as Neutral.
Bank of America has an $85 price objective for Boyd based on eight times 2025 EBITDAR. Risks to the upside include continued margin improvement, balance-sheet deleverage quicker than anticipated, and a significantly deleveraging acquisition or transaction and sports betting upside. Risks to the downside are continued impacts of COVID and a broader economic slowdown, slower-than-anticipated deleverage, and execution on integration from recent transactions.
The price outlook for Churchill Downs is $155 on 13 times 2025 EBITDA. This is a premium to both Churchill Downs’s historic average valuation and domestic gaming peers. Analyst Shaun Kelley said they view it as warranted, given the one-of-a-kind and irreplaceable nature of the Kentucky Derby, the substantial future-growth pipeline coming via the company’s historical horse racing expansion and developments, and an established, unique, and profitable online growth platform in TwinSpires.
DraftKings has a $54 price objective based on approximately 20 times 2026 adjusted EBITDA, “a premium to other proven best-of-breed disruptors, Kelley said. “We believe that this premium multiple is justified given the early-stage enthusiasm for the vertical and the scarcity value associated with DraftKIngs as well as its revenue trajectory and inflection to positive adjusted EBITDA.”
Caesars has a $40 price objective based on seven times 2025 EBITDAR, slightly below Caesars’s long-term historical average and mid-cycle multiple. Risks to the upside mainly revolve around management’s ability to significantly exceed its forecast, which could come from de-levering, late-cycle growth in Las Vegas, digital-gaming share gains, and opportunistic asset sales, land sales, joint ventures, or licensing deals.
“Risks to the downside stem from high financial and operating leverage, a lack of meaningful growth in digital market share, and potential margin deterioration,” Kelley said.
A $55 price objective for Las Vegas Sands is based on 12 times its 2025 EBITDAR estimate, “a modest discount to historical average of 13 times, given slowing recovery, China macro, and lower free cash flow conversion due to the concession capital expenditures.
Risks to the downside are a delayed recovery in Macau, continued COVID-related disruption, increased uncertainty surrounding the implications of the concession process, the pace of re-opening in Singapore, and a worse ramp than expected for new properties.
Risks to the upside are faster-than-expected return to pre-COVID Macau environment, potential border re-openings, better-than-expected returns on recent projects, mass market growth in Macau, and potential entry into the sports betting and igaming vertical.
Kelley has a $37.50 price objective for MGM Resorts International based on approximately 6.5 times their 2025 EBITDAR estimate. This multiple is a discount to MGM’s historical average since 2010, due to the company’s evolving corporate structure.
Upside risks are a stronger-than-anticipated recovery in Las Vegas, sports betting/igaming ownership changes, improving consumer sentiment, and its majority ownership stake in MGM China.
Downside risks are execution risks related to sports betting and igaming, increased Strip promotional competition, and a slower-than-expected recovery in the Macau market and U.S.
Kelley has a $110 price objective for Wynn Resorts based on 10 times their 2025 EBITDAR estimate, roughly in line with its long-term average. He called that justified, given Macau’s recovery potential, strength in Las Vegas, and stable regional trends.
Upside risks are faster-than-expected recovery in Macau and improvements on the Strip. Downside risks are slower-than-expected recovery in Macau and domestically, higher-than-expected operating leverage, and increasing financial leverage.
Kelley has a $22 price objective for Penn based on seven times 2025 EBITDAR, which he added is in line with Penn’s historical average. “We view this multiple as appropriate, given normalizing same-store-sales in regional gaming and moving past peak losses in Interactive.”
Downside risks are slower-than-expected ramp to profitability in Interactive and weaker consumer impacts and regional gaming trends more than expected.
Upside risks are material improvement in Interactive market share and less impact in regional gaming from new supply than expected.
