After shelling out $400 million to enhance its namesake venue in Black Hawk, Colo., Monarch Casino & Resort (NASDAQ:MCRI) is turning its attention back to the Atlantis Casino Resort Spa — the operator’s venue in its home market of Reno.
While there obvious benefits to Monarch’s Colorado expenditures, including a fast-growing population and recently lifted limits on table games, there are potential perks to reasserting itself in Reno, too. The operator is close to completing refurbishments on the 27-floor Concierge Tower at Atlantis — a move aimed at attracting a more affluent clientele. Investments in Reno could pay off for Monarch because some analysts see resilience in the northern Nevada gaming hub.
We expect MCRI’s Atlantis property proved more resilient than contemplated through February, with initial March data suggesting an improving regional gaming consumer post-Omicron,” said Stifel analyst Jeffrey Stantial in a recent note.
He rates Monarch shares a “buy” with a $96 price target, up from $91. Up 17.57% year-to-date, the stock is easily one of the best-performing domestic gaming equities in 2022.
For Monarch, Reno Allure
While the Reno/Lake Tahoe/Sparks market lacks the glitz and revenue heft of Las Vegas, the former still offers attractive points for operators.
Those include a growing population and companies opening new offices in the region. Recent headlines suggest gaming companies are taking note. Circa Sports is opening a retail sports in Sparks in a few months and Century Casinos (NASDAQ:CNTY) said in February it’s acquiring Nugget Sparks to enter Nevada.
Monarch CEO John Farahi tells the Reno Gazette-Journal that Reno is an increasingly “sophisticated” market that warrants higher end offerings. Along those lines, the company is refurbishing Atlantis’ first tower, which is more than three decades old.
Currently, Monarch owns just Atlantis and the aforementioned Colorado venue — the latter of which is the more profitable of the pair. However, the company is consistently mentioned as a potential player in regional casino consolidation activity.
More Reno Catalysts
Reno is a market with potential catalysts, including the return of convention business and more gamblers in the coveted 55+ age demographic returning to casinos following the pandemic.
“In Reno-Sparks, we believe market-wide performance proved more resilient through Omicron than expected, with February GGR up a considerable +35% vs. 2/2019. While Nevada has yet to report March figures, we expect demand likely remained robust with the broader U.S. regional market accelerating into March,” adds Stifel’s Stantial.
That complements strength in Colorado, where Stantial sees Monarch potentially first-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) estimates by 8% and that’s with full-scale marketing efforts that are just two months old.
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