Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Red Rock Resorts
Red Rock Resorts’s 2023 4th quarter results were generally positive, according to analysts.
According to J. P. Morgan analysts Joseph Greff in a Feb. 7 statement, the company’s fourth-quarter revenue of $462.7 million “exceeded our forecasts/consensus by 7%/5% and property level EBITDA of $220 million was 11%/9% ahead of JPM/consensus (up $13.4m year over year) with property-level margins ahead of our forecast (48% versus our 46% and 3Q23’s 46.5%). Post corporate expenses, EBITDA of $201.3 million was 11%/9% ahead of our/consensus estimates. These results reflect a stronger than expected, net positive contribution of the newly opened $790 million Durango property, which was (only) open for 27 days in the 4Q23 and helped grow the Summerlin micro zone; results also reflect a pretty healthy Las Vegas locals’ market, overall.”
Analyst Barry Jonas of Truist Securities Feb. 7 also examined Red Rock Resorts’ fourth-quarter revenues, writing that the company’s “Q4 EBITDAR came in ahead +8%/+9% for us and the Street, with the Durango opening much stronger than anticipated. Trends into Q1 appear steady, with the Super Bowl promising to be a very strong weekend for RRR and the market. We continue to see RRR as a best-in-class operator though valuation isn’t cheap, and it’s still early days for Durango’s ramp and understanding cannibalization. We raise 2024E/25E EBITDA by +2% and raise our PT to $58 (from $55). Remain Hold rate.”
Legalizing gambling in Alabama
In a Feb. 11 note, Jefferies analyst David Katz wrote that an impending vote to legalize gambling in Alabama “looks more promising than previous proposals. Currently, state legislators are discussing several bills that would expand gaming in Alabama to approve 10 casinos, a state lottery, sports betting, traditional bingo, and raffles. Legalization would allow for the development of seven casinos in regions such as Macon, Birmingham, and Lowndes counties where highly controversial electronic games currently exist. Additionally, the state would establish the Alabama Gaming Commission, whose responsibilities would include negotiating compacts & regulating casinos operated by the Poarch Creek Indians.”
Wynn Resorts
J.P. Morgan’s Greff Feb. 7 also weighed in on Wynn Resorts’s recent “strong results” in Macau and Las Vegas that “exceeded our recently revised above-consensus estimates. … We see continued mass-driven results grinding its Macau EBITDA streams higher (where Macau visitation and spend seems to be divorced by mixed China macro factors), high-end/luxury-driven outperformance in Las Vegas, an undemanding (still) valuation (relative to history) of 10x 2024E EV/EBITDA (versus its ~14x historical average), an underappreciated development growth pipeline (Wynn Al Marjan is not priced in), and apathetic investor sentiment driven by China macro concerns. Our estimates go up modestly in Las Vegas and Macau, which bumps our year-end 2024 price target to $118, up from our prior $113.”
