Jefferies Equity Research issued a Buy rating for Boyd Gaming after meeting with senior management this week in Las Vegas.
Analyst David Katz said the investor meetings provided updates on the business that he says are supportive of their positive view.
“Our take is that operating trends in both Midwest and South and Las Vegas have remained fundamentally stable on a like-for-like basis,” Katz said in a note to investors. “First-quarter results had several factors impacting volume and margins, including the Super Bowl, leap year, and high hold.”
Katz said in Las Vegas, the comparisons to 2024 reflected Red Rock Resorts opening the Durango Casino & Resort and that in turn elevated promos from other competitors, challenging performance.
“Taken in total, our impression is that our flattish estimates for the second quarter are appropriate thus far,” Katz said.
Management continues to project capital discipline on mergers and acquisitions, internal investments, and share repurchases, Katz said.
“The overall focus of management is on growth in the business through a variety of channels,” Katz said. “M&A remains topical and management continues to project discipline in terms of accretion, leverage, and structure, with limited opportunities in the current market. Our impression is that there is no imminent transformational opportunity. The focus appears to be on executing the current projects in Virginia and (tribal casino project in) California, internal capital improvements, and longer-term growth from digital gaming should igaming legalization proliferate longer term.”
Management noted that the $100 million “bogey of growth capital spending it has guided ongoing,” aside from the development partnership in Norfolk, Virginia, “is an efficient avenue of earnings growth, whereby it can identify clear paths to ROI with appropriate discipline with a wide range of opportunities available.” M&A is considerably more expensive and will be approached opportunistically, he added.
While the ownership stake in FanDuel is currently not recognized in the shares, Katz said management suggests that the relationship has been productive in both directions, with little attention given to dissolving or capturing value at this time.
“With the contract expiring in 2028 and each party having options to force a transaction at mutually agreed terms, the deal would have to create challenges in either direction in order to be resolved in advance of that time,” Katz said. “Therefore, we view the value as a considerable latent value for the time being.”
Katz said that while the casino group as a whole has proven challenging, given the limited execution in the core business and questionable capital decisions, he believes “the peer group casts a shadow across the group and impacts Boyd shares to a limited degree. We further believe that while more significant growth does not appear readily available to Boyd, it is best positioned to capitalize among its peers should it present,” Katz said.
Jefferies has a price target of $84. Boyd stock closed Tuesday at $73.70.
