Golden Entertainment shares shine their way to new highs

Publication date: May 7, 2021, 09: 43 h.

Last updated: May 7, 2021, 01: 39 h.

Golden Entertainment (NASDAQ: GDEN) is surging higher on Friday, adding to the already dizzying pace of recent gains. This comes after an analyst quickly raised the Strat operator's price target.

In a note to clients today, David Bain analyst B. Riley reiterates " buy " while raising his price forecast for PLN to 60 from 48. Analysts issuing the same ratings on a stock with updated price estimates is an everyday occurrence in the financial markets. But in this case it's notable because just a week ago Bain initiated coverage of the casino operator at 48.

We believe the stock is set at a much higher level, with 2023 enterprise value / earnings before interest, taxes, depreciation and amortization (EBITDA) of 6.4x versus peers at 10 x and free cash flow (FCF) valuation per share less than half of the comparative data, "- said the analyst.

Player stocks are generally higher on Friday, but gold stands out. It is higher in midday trading on 15. 55 percent volume is already nearly double the daily average. Bain's new target price marks an increase of nearly 68 percent since the casino stock closed Thursday.

Going with Golden Stock

Las Vegas-based Golden operates 10 casinos, nine of which are in Southern Nevada, including Strat . The site generated record EBITDA in the first quarter.

While the operator has a large footprint in its home state, it is not dependent on Strip traffic and trends. Rather, it is more tied to a rapidly recovering segment of Las Vegas residents (LVL) and favorable demographic trends, such as an influx of retirees from cold states to Nevada and Californians fleeing high taxes.

For investors, these points are important because, as Bain points out, the LVL market accounts for 85 percent of Golden's EBITDA. Even with this significant percentage, the analyst says the operator's local exposure is "undervalued" by the investment community.

" LVL and regional games benefit from short- and long-term factors, including increasing permitted capacity and introducing vaccines, benefiting the core older demographic " Bain said.

Gold: " More Special "

With impressive margin expansion, rising vaccination levels and subdued demand, there is no shortage of enthusiasm for regional gaming action. But no two operators are alike, and according to Bain, there are clear reasons why Golden stands out among the regional names.

"Even more unique to GDEN is that Nevada's offering exactly matches the higher income/wealth migration from California, particularly from the gaming industry spread across bars and taverns rooted in millennials, "said analyst B. Riley. "Moreover, the introduction of the Raiders, new Strip capacity and strong residential values correlates with GDEN's portfolio being more" unique "than other regional casino companies, in our view."

Nearly $ 15 is currently unaccounted for, according to Bain. The split includes $ 10 for potential approval of its Pennsylvania route business and 4. 60 for $1.2 billion of unused Las Vegas real estate owned by the company.