Following Monarch Casino Resorts’s first-quarter earnings release, two Wall Street analysts offered guardedly favorable takes on the company.
Jefferies Equity Research’s David Katz hewed to a Hold rating on the stock, while Truist Securities’s Barry Jonas reiterated his Buy position. The latter did, however, take his price target on MCRI shares down to $100 apiece from $105 per share. The stock was trading at $76.03 per share at the time.
“Although the economic uncertainties cast a shadow over the sector and [Monarch] is not exempt, its updated, owned assets should prove to mitigate the consumer softness we believe to be forthcoming,” opined Katz.
“While management cautioned that consumers have begun to voice tariffs/macro concerns, there has been no major operational impact thus far,” reported Jonas, who said he “remains positive” on the stock.
Monarch beat Wall Street’s consensus projections for both revenue ($124.54 million) and cash flow ($41.1 million). Reacted Katz, “The quarter presented little surprise vs. our expectations and the upside from gaining market share in Black Hawk appears to be well understood.”
Describing Monarch Black Hawk as the premier luxury casino in Colorado, Jonas said that management believes it still has room to grow as it continues marketing the resort to Denver and Boulder audiences. “At the same time, management noted the market seeing increasing promotional activity, though its best-in-class product is a differentiator,” he added.
Katz projected “very modest growth” in Black Hawk, with earnings uptick at Monarch’s Reno property expected starting in July. “We anticipate consumer weakness becoming clearer in the next quarter and room renovations at Reno are the primary growth driver of earnings,” he explained.
Jonas observed that the Reno upgrades, which are costing $100 million, will justify a 25 percent increase in daily rates, into the $120-$125 range. He also noted that management wasn’t engaging in any stock repurchases. Applauding the company’s lack of debt, Jonas offered that Monarch was nicely poised for “capital returns or other accretive uses of capital.”
Katz added that Monarch management was actively pursuing growth opportunities, albeit only on the basis of wholly owned assets. Monarch also has yet to feel the adverse effect of a $74 million judgment against it on behalf of PCL Construction Services. The casino company is appealing that verdict.
Returning to the topic of the economy, Jonas wrote that Monarch executives “did note that they are hearing (not seeing) consumers voice their economic concerns. The high end of the database feels the stock market selloff while the low end is more sensitive to rising inflation. Management is clearly cautious but at this point we don’t think performance or forward planning has been significantly impacted.”
Katz took comfort in Monarch’s limited geographical spread. He observed that Monarch “shares the public markets’ concerns over the economy and the limited visibility ahead, although its exposure to inbound international travel is relatively less than other major markets.”
