Supported by the strength of its downtown Las Vegas venues, Boyd Gaming (NYSE: BYD) easily topped first-quarter estimates, sparking a fresh round of bullish commentary from Wall Street analysts in the process.
The Fremont Casino operator earned $1.71 a share on revenue of $963.97 million during the January through March period. Analysts expected earnings of $1.54 on sales of $889.59. On the back of those strong results, at least five sell-side analysts lifted their price targets on Boyd. That group includes Stifel Steven Wieczynski, who increased his price forecast on the regional casino operator to $83 from $81. That implies upside of about 25% from the April 25 close.
Comparisons start to get more difficult as we move through the middle of 2023, but even with tougher comparisons, we still believe BYD should post solid results moving forward as we believe investor expectations across regional gaming remain somewhat benign,” Wieczynski wrote in a note to clients. “With a healthy, low-levered balance sheet, BYD is the perfect name to own in any environment but more so now given the near-term remains an unknown.”
At the end of March, Boyd had $263.5 million in cash on hand and debt of $3 billion. Its balance sheet is indeed strong, as highlighted by the repurchase of $106 million worth of its own shares during the January quarter. Boyd has $133 million left on a previously announced buyback plan.
Downtown Las Vegas Boosts Boyd
Boyd runs 10 gaming venues in its home market, including Aliante, California, Cannery, Fremont, Gold Coast, Jokers Wild, Main Street Station, Sam’s Town, Suncoast, and The Orleans.
California, Fremont, and Main Street Station are located in downtown Las Vegas, which is a plus for the operator when visitation to that area of Sin City is increasing.
With more people visiting Las Vegas, more of them are stopping by downtown during their stay. Fifty-eight percent of Las Vegas visitors reported they visited Downtown Las Vegas last year,” said Boyd CEO Keith Smith on a conference call. “This increased visitation is benefiting all three of our downtown properties.”
Smith also highlighted strength among Boyd’s long-devoted Hawaiian visitors, noting that play among those clients at the operator’s downtown venues jumped 10% year over year.
Main Street Station, which is across the street from California, is in the midst of renovations that are expected to be completed later in 2023. When that happens, all three of Boyd’s downtown venues will have been updated over the past two years.
In addition to its Las Vegas properties, Boyd runs 18 casino hotels in nine other states.
Boyd Stock Discount Unwarranted
As Stifel’s Wieczynski pointed out, Boyd owns nearly all of its real estate, a 5% stake in FanDuel, and sports a healthy balance sheet, yet the stock is inexpensive relative to peers.
We believe BYD should trade more around a 7%-8% FCF yield, which would indicate shares are worth $80-$90, and again, this is not being aggressive with our estimates,” added the analyst.
It doesn’t appear as though Boyd will cloud its investment picture with an acquisition, as Smith told analysts on the call that there’s “nothing interesting to talk of” at the moment in terms of potential consolidation.
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