Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Bally’s acquired
The news that Bally’s is being acquired by Standard General sent shock waves through the gaming industry last week.
Bally’s will be “purchased to $18.25/share, which Bally’s noted as a $4.6 billion EV,” according to Truist Securities analyst Barry Jonas. “The takeout price represents a +71% premium to Bally’s 30-day VWAP, a +14% premium to our $16 price target. and a +22% premium to Standard General’s $15 March offer. Bally’s will remain public upon closing, though combine with The Queen Casino & Entertainment, a small private gaming company majority owned by Standard General. Shareholders have the option to convert their equity to the new company; but the deal may not close for up to a year and hence we’re downgrading to Hold. Our price target moves to the takeout price of $18.25.”
Churchill Downs results
David Katz of Jefferies shared his thoughts about the release of Churchill Downs 2Q24 results with “$890.7 million of revenue, above our $829.2 million and the Street’s $862.1 million, and adjusted EBITDA of $444.8 million, above our $401.4 million and the Street’s $410 million. The outperformance was driven by strong results in all segments, particularly live and historical racing and gaming.
During the quarter, gaming generated $274.2 million of revenue and $140.7 million of adjusted EBITDA, vs our $257.1 million and $123.6 million, respectively, and consensus of $263.4 million and $127.0 million with Terre Haute starting off better than expected. Meanwhile, Live and Historical Racing generated $464.7 million of revenue and $279.2 million of adjusted EBITDA, vs. our $429.8 million and $257.3 million, and consensus of $263.1 million of EBITDA with strength in Virginia. Next, TwinSpires reported $151.7 million of revenue and $46.2 million of adjusted EBITDA, higher than our $142.5 million and $41.5 million respectively, with $14.7 million benefit from Exacta. Lastly, all other reported an adjusted EBITDA loss of $21.3 million, vs our loss of $21 million.”
Truist Securities Barry Jonas looked at Churchill, writing that the company “ posted another strong +8% Q2 beat, while this morning’s call had a positive outlook. We continue to see Churchill Down’s portfolio generating ~$1.4 billion EBITDA once fully open/ramped by 2025/26, with potential upside from historical racing machines in Virginia/Kentucky/New Hampshire further enhanced by Exacta optimizations. Newly announced details to Churchill Down Racetrack improvements round-out growth opportunities for the company’s well positioned assets, while we expect more to come. We flow through most of the beat (+2% ’24 EBITDA) and make modest tweaks to our model. Reiterate Buy and raise our price target to $166 from $165 price target.
Gaming and Leisure Properties Inc. results
The fortunes of Gaming and Leisure Properties Inc. also came under the watchful eye of J.P. Morgan’s Joseph Greff, who wrote, “Following 2Q24 results, we update our model to comport to GLPI’s updated 2024 full-year guidance. For 2024, we model $1.36 billion of EBITDA (up $5 million versus prior), $1.059 billion of adjusted funds from operations (up $3 million versus prior), and $3.76 adjusted funds from operations per share (unchanged). For 2025, we model $1.385 billion of EBITDA (up $7 million versus prior), $1.087 billion of adjusted funds from operations (up $5 million versus prior), and $3.84 adjusted funds from operations/share (down $0.01 versus prior).
We maintain our Neutral rating and like the steady annuity-like rent streams and GLPI’s ability to source and augment growth with tuck-in acquisitions, like the recent Bally’s and Strategic Gaming acquisitions.
