Casinos & Hotels

Deutsche Bank Says Place Q4 Bets on 4 Top Gaming Stocks

Lee Jackson

Published: October 1, 2018 10:00 am

Last Updated: January 11, 2020 5:05 pm

If there is anything that brings out the gambler in many of us, it’s the annual NFL and college football season, and one area where gambling is kind of a way of life is Las Vegas, where many locals are also regulars at the casinos. With sports gambling restrictions being lifted this year, there’s a good chance that sports-books around the country could see more action.

Deutsche Bank follows four companies that remain solid choices for investors looking to add gaming stocks to their portfolio. All are rated Buy and make good sense for aggressive accounts looking for some value.

Boyd Gaming

This top company remains a Wall Street favorite. Boyd Gaming Corp. (NYSE: BYD) operates as a multi-jurisdictional gaming company through three segments: Las Vegas Locals, Downtown Las Vegas and Midwest and South. The company owns and operates gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.

The company also owns and operates a travel agency and a captive insurance company that underwrites travel-related insurance in Hawaii. As of December 31, 2017, the company owned and operated 24 gaming entertainment properties, offering a total of 1,358,856 square feet of casino space, 30,267 slot machines, 632 table games and 9,372 hotel rooms.

Boyd remains a favorite for Las Vegas locals and is substantially levered to the Las Vegas market. The company generally targets largely locals in this market. The company’s downtown properties also draw Hawaiian tourists. In general, Las Vegas locals performance is less affected by weekends versus weekdays in a period than other gaming markets would be, as a substantial portion of the local economy works in hospitality.

The Deutsche Bank price target is $44, and the Wall Street consensus target is $42.09. The shares traded early Monday at $33.60.

Eldorado Resorts

This company has a diverse property portfolio, with casinos and resort stretched across the country. Eldorado Resorts Inc. (NYSE: ERI) is a gaming and hospitality company that owns and operates gaming facilities located in Ohio, Louisiana, Nevada, Pennsylvania and West Virginia.

Eldorado Resorts owns and operates approximately 503,000 square feet of casino space with approximately 20,000 slot machines and video lottery terminals, over 550 table and poker games, 45 restaurants and 6,500 hotel rooms. As of December 31, 2016, the company owned and operated various properties, including Eldorado Resort Casino Reno (Eldorado Reno), Silver Legacy Resort Casino (Silver Legacy), Circus Circus Reno (Circus Reno), Eldorado Resort Casino Shreveport (Eldorado Shreveport), Mountaineer Casino, Racetrack & Resort (Mountaineer), Presque Isle Downs & Casino (Presque Isle Downs) and Eldorado Gaming Scioto Downs.

The company also reported a strong quarter, with EBITDA growth and cost savings being among the highlights for investors. Many analysts cite the casino’s proximity to the red-hot Reno and Blackhawk markets as a big positive.

Deutsche Bank has a price objective of $53, and the consensus target price is $51.56. The stock traded at $48.30 Monday morning.

Penn National Gaming

This company bought the famous Tropicana in Las Vegas back in 2016 to bolster the firm’s gaming portfolio. Penn National Gaming Inc. (NASDAQ: PENN) owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations, with a focus on slot machine entertainment.

As of December 31, 2017, the company operated 29 facilities in 17 jurisdictions, including California, Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario, Canada. As of December 31, 2017, in aggregate, Penn National Gaming operated approximately 36,700 gaming machines, 820 table games and 4,800 hotel rooms.

The $37 Deutsche Bank price target compares with the $37.91 consensus target. Shares were trading at $33.20.

Red Rock Resorts

This is another company that focuses on the lucrative Las Vegas locals market. While Red Rock Resorts Inc. (NASDAQ: RRR) is a leading casino operator that primarily operates in the Las Vegas, it also manages two Native American tribal facilities, in northern California and western Michigan. The company operates 19 casino and entertainment properties in the Las Vegas.

In May 2016, Red Rock announced an agreement to acquire the Palms Hotel and Casino in Las Vegas for $312.5 million. The company’s solid presence in Las Vegas helped drive very solid overall results despite a messy fourth quarter where EBITDA came in below expectations.

Deutsche Bank has a $39 price target. The consensus target is $38.00, and the shares traded at $26.75.

These are four outstanding stocks for investors to add to portfolios for a gaming and lodging presence. It should be noted the sector is very cyclical, and downturns in the economy tend to hit the shares harder than most. With that in mind, they all look poised for a solid fall and football gambling season.