Golden Entertainment Interesting Casino Stock Story, Says Analyst

Posted on: July 25, 2023, 10:42h. 

Last updated on: July 25, 2023, 11:33h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Golden Entertainment (NASDAQ: GDEN) are higher by 16% year to date, and the Strat operator could have more in store for investors.

Golden stock
Golden Entertainment’s Strat Las Vegas. An analyst says the stock is an interesting story. (Image: OnTheStrip.com)

That’s the sentiment of B. Riley analyst David Bain, who in a new report to clients highlighted Golden as one of the more compelling names among gaming equities. He added that the firm could become a shareholder rewards story pending the finalization of the sale of Rocky Gap Casino Resort in Flintstone, Md. That transaction could close as soon as this week.

We believe GDEN remains one of the better stories in gaming — hedged with land ownership and near peer-low net leverage to play offense in a lower macro environment or to repurchase shares more aggressively and pay dividends in a better one,” noted Bain. “We believe post closing of its Rocky Gap casino sale, GDEN will announce new return of capital initiatives.”

Las Vegas-based Golden hasn’t made an official announcement regarding shareholder rewards. But if it does, it would join an increasingly lengthy list of gaming companies committing to buybacks and dividends. Bain rates the stock a “buy” with a $70 price target, implying upside of 71.2% from the July 24 close.

Strat: Near-Term Pain, Long-Term Gain

The Strat is Golden’s flagship property, and the operator is currently enhancing that venue. Bain points out there have been minor construction-related disruptions at the property, but those issues are in the rearview mirror.

The analyst pared his second-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate on Golden to $62 million from $65 million. That’s to account for hiccups at the Strat. But he added the disruptions can be seen as, “sacrifice two million to get ten million.”

One way of looking at that commentary is that with Las Vegas’ convention business rebounding, and with a slew of marquee events coming to Sin City in the months ahead, the renovated Strat positions Golden to benefit, and potentially attract a higher tier of customer.

“2Q LV earnings commentary should showcase a positive 3Q/4Q convention outlook and event calendar. While forward Strip gross gaming revenue (GGR) comps are elevated, casino represents under 35% of most major Strip casinos,” observed Bain. “The growing Las Vegas flywheel of events/ attractions in an experiential economy continues to increase the quantity and quality of patrons both near and longer term.”

Other Catalysts for Golden Entertainment

Beyond broader Las Vegas vibrancy and the Strat renovations, Golden has other potential tailwinds, some of which could be highlighted by management when the operator delivers second-quarter results on July 31.

Those include ongoing efforts to reduce leverage and continued share repurchases, both of which the company has proven proficient at in recent quarters.

It’s also possible management will provide an update on the Colorado Belle Casino Resort in Laughlin, Nev., which has been closed since early 2020. But that remains to be seen. Golden operates two other casino hotels in that market, and could opt to sell the Belle to raise additional capital.