Golden Entertainment (NASDAQ:GDEN) slid 9.39% today after the Arizona Charlie’s operator reported second-quarter earnings that missed Wall Street estimates, but some analysts remain bullish on the name.
The Strat Las Vegas. Operator Golden Entertainment is still favored by analysts despite Q2 earnings miss. (Image: OnTheStrip.com)
The casino operator notched earnings per share of 67 cents during the April through June period on revenue of $289.37 million. Analysts expected earnings of 90 cents on sales of $287.62 million. Although gaming company is exceeding 2019 performance metrics, investors took the stock to task today, extending an 18.64% year-to-date decline. Even with that weakness, some analysts remain enthusiastic about the shares.
We continue to believe GDEN’s Nevada-centric portfolio is undervalued as it captures structural Strip out-of-COVID upside drivers and significant, property-specific zero-capex amenity additions,” wrote B. Riley analyst David Bain in a note to clients today.
He rates Golden stock a “buy” with a $70 price target. That implies upside of more than 70% from today’s close.
Investors May Be Missing Golden Stock’s Finer Points
Aside from the Rocky Gap casino-hotel in Maryland, Golden’s properties are located throughout the Las Vegas Valley, levering the operator to vibrancy in that market.
That includes a massive influx of residents from higher tax states that are paying cash for real estate and enjoying Nevada’s lower cost of living with some of those savings being funneled to recreational gaming at local casinos. While that catalyst is largely priced into shares of operators with exposure to the Las Vegas locals market, Golden has other favorable traits that the investment community may currently be glossing over.
Those include the points that since the end of last year, the gaming trimmed debt by $200 million and repurchased nearly $50 million worth of its own shares.
“Management indicated the return of capital remains its core focus. However, it also indicated a willingness to consider acquisitions,” adds Bain. “We do not believe anything is imminent or in advanced stages of discussion. Still, given GDEN’s strong balance sheet/access to capital, combined with potential downside valuation volatility of individual casino properties in a weakened macro, GDEN is seemingly more willing to be opportunistic should a strategic NV casino acquisition opportunity present itself at the right price.”
The off-Strip Strat is Golden’s marquee venue in Las Vegas and while it struggled with some supply chain issues which hindered its second-quarter occupancy rate, things are back on the right track at the property. That could propel Golden stock as 2022 moves forward.
“We calculate an additional $12M to $16M of additional per annum EBITDA (well over half of which, at the mid-point, is upside to our forecast) from occupancy rates rising back to normalized levels,” notes Bain.
The analyst points out his forecasts for Strat don’t include the addition of the Atomic Range golf facility, which could drive another $10 million or more in annual revenue when it debuts in early 2023.