Boyd Gaming Bounces Despite Ugly Q1, Analyst Sees ‘Compelling’ Long-Term Opportunity

Posted on: April 29, 2020, 09:53h. 

Last updated on: April 29, 2020, 10:42h.

Boyd Gaming (NYSE:BYD) is rallying Wednesday, trading higher by 2.34 percent even after the company reported an unexpected adjusted first-quarter loss. But the stock may be getting some support from bullish analyst commentary.

Boyd Gaming Q1 Results
California Casino owner Boyd Gaming reported dismal Q1 results, but an analyst sees plenty of opportunity in the stock. (Image: Las Vegas Review-Journal)

The operator of The Orleans and Sam’s Town in Las Vegas posted an adjusted loss of two cents a share on revenue of $680.5 million for the first three months of the year. Analysts expected Boyd to report earnings of 23 cents on turnover of $770 million.

Boyd runs gaming properties in 10 states, underscoring its vulnerability to coronavirus closures. That exposure is being acknowledged by investors this year, as the stock is lower by nearly 44 percent. But at least one analyst sees opportunity in shares of the regional gaming operator.

In the face of the COVID-19 crisis, we identify BYD as a name presenting short-term security and long-term opportunity,” said Stifel analyst Steven Wieczynski in a note obtained by “As a result of recent commitments to fine-tuning its capital structure and operations, combined with the retention of the majority of its real estate ownership, we believe BYD appears relatively well-positioned to handle whatever COVID-19 may throw its way.”

The analyst sees Boyd benefiting from its Las Vegas locals/regional focus because those markets are less dependent on gamblers getting on planes to visit than, say, the Las Vegas Strip.

Waiting on Reopenings

In addition to Nevada, Boyd has casinos in the following states: Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. That means the company will likely be subject to a variety of directives as states move to reopen economies.

CEO Keith Smith acknowledged the company doesn’t know exactly when it’ll be able to open its casinos, and that it’ll likely be dealing with an array of time frames for doing that in the various states in which it does business.

“As of today (April 28), we do not know when we will be permitted to resume operations and bring our team members back to work,” said Smith, speaking on a conference call with analysts. “It is likely that each of our 10 states will reopen on a different timeline, each with their own specific health and safety guidelines. We are currently working with state and local officials across the country to gain a better understanding of when we will be able to reopen and what reopening may look like.”

Boyd is currently burning $60 million a month in cash, which is better than the $70 million Wall Street expected to hear. With $831 million in cash on hand at the end of the first quarter, the Aliante operator can survive just over a year in a zero-revenue climate, according to Wieczynski.

Balance Sheet Benefits

In addition to its cash position, Boyd took other cost-cutting measures, including suspending its dividend, furloughing staff ,and slashing 2020 capital expenditures.

Another source of allure, in Wieczynski’s opinion, is the company’s ownership of its property assets, meaning it has something to borrow against if it needs additional capital.

“Although we do not expect it to get to this point, we believe real estate could serve as a liquidity option of last resort in the event the crisis were to last well beyond our current expectations,” said the analyst.

He has a “buy” rating on Boyd with a 12-month price target of $24, down from $40. The new forecast implies upside of 44.5 percent from where the stock trades at this writing.