Nevada Population Could Support Boyd, Red Rock Stocks

Posted on: December 19, 2022, 04:00h. 

Last updated on: December 19, 2022, 02:00h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Boyd Gaming (NYSE: BYD) and Red Rock Resorts (NASDAQ: RRR) are among the gaming stocks that could benefit from Nevada’s rapid population growth.

A recent report by software firm Inspection Support Network named Nevada the third-fastest growing state in the country over the past five years, trailing only Idaho and neighboring Utah. Inspection’s list of the 15 most rapidly growing large US metro areas shows Las Vegas, including the suburbs of Henderson and Paradise, ranking ninth.

From 2016 to 2021, that area added 153,640 new residents, good for population growth of 7.2%. Over that span, Nevada’s overall population increased by 226,428, or a 7.8% jump.

While the Las Vegas Strip and, to a lesser extent, downtown rely on tourists, the bulk of the Sin City venues operated by Boyd, Red Rock, and Golden Entertainment (NASDAQ: GDEN) are supported by locals. That positions those companies to benefit from the Las Vegas Valley’s soaring population. Those gaming entities are already benefiting from the strength of the Las Vegas locals demographic.

The LV Locals market continues to be one of the most resilient gaming markets across the U.S. 3Q22 results reflect those trends with the biggest surprise coming on the margin side of the equation,” said Stifel analyst Steven Wieczynski in an October report on Red Rock.

The average year-to-date loss for Boyd, Golden, and Red Rock is well below that of MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR) — the two largest Strip operators.

Why Population Growth is Beneficial

Data confirms the viability of the Boyd, Golden, and Red Rock equity thesis on the back of Nevada population growth. In addition to its namesake venue in Summerlin and the Green Valley Ranch in Henderson, Red Rock operates multiple gaming properties under the Station brand throughout the Las Vegas area. The company also runs 10 Wildfire casinos, including seven in Henderson, according to its website.

“Boyd continues to churn out healthy operating metrics and strong free cash flow, which is being directed back to shareholders at a rapid pace,” added Wieczynski.

All three companies run the bulk of their Nevada casinos in the Las Vegas area, though Golden operates two gaming venues in Laughlin. None of the three have exposure to Reno-Lake Tahoe — itself a fast-growing part of  Nevada — but there’s speculation that’s a market Golden could eventually target.

Demographic Points Favor Las Vegas Locals Stocks

Multiple points favor the long-term potential for stocks such as Boyd and Red Rock. Notably, the largest contributing region to Las Vegas’s population spurt between 2016 and 2021 was Los Angeles, including outlying areas, such as Anaheim and Long Beach.

That confirms what many analysts have been discussing for some time. Californians are fleeing that high-tax state and its astounding real estate prices in favor of more cost-friendly Nevada. With their extra cash, they can make more visits to local casinos.

Boding well for the long-term health of the Strip are the facts that Salt Lake City ranks as the 10th-fastest large metro area. Provo-Orem, Utah is the fastest-growing mid-size metropolitan area, while St. George, Utah, which is close to the Nevada border, is the most rapidly growing small city, according to Inspection Support Network.