Boyd Gaming Stock Is Hot, But Underappreciated, Says Analyst

Posted on: May 28, 2021, 12:47h. 

Last updated on: June 30, 2021, 10:08h.

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

Up 52.31% year-to-date, Boyd Gaming (NYSE:BYD) stock is a star among gaming equities. But at least one analyst says the casino operator may not be getting all the adulation it deserves.

Boyd stock
Boyd’s Gold Coast Casino in Las Vegas. An analyst sees big gains ahead for the stock. (Image: Las Vegas Review-Journal)

In a new note to clients, Stifel analyst Steven Wieczynski reiterates a “buy” rating on the Sam’s Town operator, while lifting his price target on the name to $82 from $80. That implies upside of about 28 percent from the May 27 close. The analyst’s report follows investor day meetings with Boyd executives, including CFO Josh Hirsberg.

We walk away impressed with BYD’s execution, and to us, it seems trends across their Las Vegas Locals (LVL) and regional segments continue to be robust,” said Wieczynski.

The Las Vegas-based company runs 28 gaming venues across 10 states, including 11 in its home city. Several of Boyd’s Sin City venues remain shuttered. But Nevada COVID-19 casino restrictions will be a thing of the past on June 1, and traffic trends are improving in downtown Las Vegas, where Boyd is the top operator.

Wieczynski says the big question that needs to be answered is how much of Boyd’s newly gained clientele is sticky, and how sustainable that business is. It’s a tough query to answer at this juncture. But executives told the analyst that many of the company’s rated players haven’t returned, and when they do, that can offset losses among newer, fleeting gamblers.

A Good Time to Consider Boyd Stock

A 9.57 percent gain this week notwithstanding, Boyd stock recently joined other gaming names to the downside, shedding almost nine percent from its April peak.

Still, shares of the Orleans operator are mostly favored on Wall Street, with analysts highlighting industry-leading margin expansion, strength in regional markets, pent-up demand from the 55+ demographic, and an often overlooked sports betting story. Combined, those factors may make it an ideal time to revisit Boyd stock, particularly with it off its recent highs.

“We believe now is a great time to be doing work on this story. What we continue to like the most about the BYD story in the near term is that it doesn’t have as much risk associated with the sports betting/iGaming euphoria,” said Wieczynski.

Boyd owns five percent of FanDuel, giving it a low-risk avenue into the proliferation of sports wagering in the US, and a possible monetization tool should Flutter Entertainment spin-off the sportsbook operator.

More Reasons to Like Boyd

While many regional casino stocks are gaining acclaim for margin improvements in the wake of the coronavirus pandemic, the issue now becomes: can operators maintain those lofty margins and keep them at or above 2019 levels?

Wieczynski believes Boyd can do just that, and even build on recent margin enhancements. Combine that with seniors getting vaccinated and returning to casinos, and the FanDuel “call option,” and Boyd remains one of the most catalyst-rich names in the gaming industry.

“Every catalyst we pointed out should help drive free cash flow higher,” said the analyst. “We believe BYD can generate ~$4/share per year moving forward, which should allow them to start buying back shares again or bring back the dividend. We believe BYD will end the year with net leverage around 4x.”