Churchill Downs ‘Flight-to-Quality’ Idea Among Gaming Stocks

Posted on: April 10, 2025, 02:12h. 

Last updated on: April 10, 2025, 02:28h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.
  • Stock looks attractive ahead of Kentucky Derby
  • Tariff uncertainty a headwind, but Derby could be bigger catalyst

With the Kentucky Derby just a few weeks away, Churchill Downs (NASDAQ: CHDN) could be ready to take its turn in the gaming stock spotlight.

Churchill Downs, CDI, New York Horseracing Association, NYRA, Horseracing Integrity and Safety Authority, HISA
Churchill Downs in Kentucky. An analyst is constructive on the stock. (Image: Churchill Downs)

Down 22.63% year to date and 31.22% below the 52-week high, the shares are mired in a bear market while showing effects from US tariff tumult, but the Derby could be the near-term spark the stock needs as it presents the operator with an opportunity to show shareholders that investments at Churchill Downs Racetrack (CDRT) will pay dividends.

We see growing investor appreciation for CHDN’s high-quality Kentucky Derby asset (pricing power; high margin; proven durability), with potential flight-to-quality tailwinds amidst an uncertain outlook for the consumer,” observes Stifel analyst Jeffrey Stantial in a new report.

He mentioned the upcoming six-part Netflix series “Race for the Crown”, which premiers on April 22, as a potential catalyst for increased Derby viewership this year. That’s a potentially meaningful factor because more eyeballs on the first leg of the Triple Crown could drive more betting, possibly extending a multiyear run of record-setting Derby handle.

Stantial rates the stock a “buy” with a $142 price target, down from $161. That implies potential upside of about 36% from where the stock trades at this writing.

Churchill Downs Investments in Focus

The gaming company is planning broad capital expenditures aimed at enhancing its storied Kentucky racetrack and luring more affluent visitors to Derby Week.

In February, Churchill Downs forecast spending of up to $920 million over the next several years aimed at improving the facility. The company estimated it could spend $350 million to $400 million on those projects this year.

Stantial noted that while management has an impressive track record of executing for the betterment of investors on capital spending initiatives, tariffs could present a unique headwind — one compelling shareholders to seek more clarity from executives.

“While we’ve historically taken comfort in CHDN’s successful CDRT capex track record, potential tariff-related inflation complicates the underwriting exercise with derivative implications to consumer health potentially also impacting pricing power,” according to the analyst. “We expect management to highlight opportunities to lock in pricing as well as CHDN’s historical track record in avoiding project overruns, however line-of-sight to favorable (and conclusive) tariff resolution may be needed for investors to get constructive again on projected returns.”

Rose Ramp Should Help, Too

Aside from the Derby, continuing acceleration at the Rose casino hotel in Dumfries, Va. could be another longer-ranging catalyst for Churchill Downs’ stock.

That venue got off to a slow start and was hindered by historically poor weather in the Mid-Atlantic region earlier this year, but Stantial sees limited vulnerability to decreasing federal payrolls at the hands of the Department of Government Efficiency (DOGE) and the possibility that Churchill management will highlight improving player-level metrics.

“We expect management to highlight solid per-player metrics, with visitation ramping gradually alongside consumer awareness & accelerated marketing efforts. DOGE initiative poses risk to broader D.C. area consumer health, though we see limited overlap between federal workers & target regional gaming consumer,” concludes the analyst.