Full House Stock Testing Patience, Long-Term Outlook Bright

Posted on: November 7, 2024, 02:37h. 

Last updated on: November 7, 2024, 03:08h.

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

As most gaming stocks gained or were mostly flat on Thursday, shares of Full House Resorts (NASDAQ: FLL) sank after the regional casino operator reported weaker-than-expected third-quarter results late Wednesday. In late trading, the stock is off 8% on volume that’s double the daily average.

Waukegan casino, Full House Resorts, Potawatomi, American Place, permanent casino
A digital rendering of the planned permanent American Place Casino in Waukegan, Ill. Full House Resorts stock could test investors’ patience, but be a long-term winner. (Image: Full House Resorts)

That could be one indication patience is required with the shares, as acknowledged by B. Riley analyst David Bain in a new report, but he added the long-term outlook for Full House is compelling. Bain reiterated a “buy” rating on the stock while lowering his price target to $8 from $9. Bain is constructive on contributions from the operator’s American Place casino hotel in Waukegan, Ill. and its Chamonix Casino Hotel in Cripple Creek, Colo.

FLL’s Illinois (American Place) and Colorado (Chamonix) developments are transformational to earnings before interest, taxes, depreciation, and amortization (EBITDA) generation and valuation,” observed the analyst. “We believe American Place has found its stride with marketing refinements underway for additional gains.”

American Place is currently operating in a temporary venue with the permanent version of the property expected to open in 2027.

Full House Seeing Strength in Illinois

Waukegan is currently in the midst of a now protracted legal battle with the Forest County Potawatomi of Wisconsin – a tribal gaming operator that alleges the city’s awarding of a gaming license to Full House was the result of an unfair bidding process.

Full House has acknowledged that the court case has resulted in delays and created uncertainty around the American Place project. However, The Temporary at American Place posted strong third-quarter results and Bain noted that the success of the newly minted Hard Rock casino in Rockford, Ill. could bode well for the Full House property.

“Hard Rock Casino Rockford permanent facility went live in late August, and in September, gross gaming revenue was up 140% m/m. Again, while not an American Place permanent estimate, we believe it demonstrates earnings power potential versus a traditional investor expected return from the project,” Bain noted.

Waukegan is about a two-hour drive from Rockford so the Full House property isn’t in direct competition with the Hard Rock venue, but American Place is an hour away from Chicago, and that proximity could pay long-term dividends.

Colorado Ramp Bumpy, but Improvement Near

The Chamonix Casino Hotel in Cripple Creek, Colo. opened last December, and EBITDA ramp there has been bumpy in the venue’s first year. Still, the venue remains integral to the long-term Full House investment thesis. Chamonix has the potential to be one of the more luxurious and highly rated casino resorts in Colorado, and it will feature the amenities to make runs at those titles.

Bain noted that EBITDA volatility should wane over time, adding that Chamonix fills a void in the Cripple Creek market.

“While Chamonix’s initial EBITDA ramp is likely to remain uneven, we continue to believe it solves a gaming win imbalance in Cripple Creek relative to other Colorado gaming markets. Again, we see no change to this thesis and our longer-term outlook for EBITDA generation of $45M+ from Chamonix at maturity,” he concluded.