Churchill Downs Stock Could See Post-Kentucky Derby Lift

Posted on: May 8, 2023, 01:42h. 

Last updated on: May 9, 2023, 12:39h.

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

The stock is modestly lower Monday, but Churchill Downs (NASDAQ: CHND) could be a name to watch this week following its record-breaking Kentucky Derby handle.

Churchill
Mage crosses the finish line to win the Kentucky Derby. The event could lift Churchill Downs stock. (Image: Horse Racing Nation)

Including Saturday’s run for the roses, the broader slate of Derby day races and the Kentucky Derby week program, wagering handle hit all-time highs. Derby Day handle surged to $288.7 million from $273.8 million a year earlier, while total betting on the main event increased to $188.7 million from the previous record of $179 million notched last year. Across all sources, Derby Week betting handle soared to a record $412 million from $391.8 million in 2022.

TwinSpires, the official betting partner of the Kentucky Derby, handled a new record of $73.6 million in wagering on Churchill Downs races for the Kentucky Derby Day program, compared to last year’s record of $67.4 million. TwinSpires’ handle on the Kentucky Derby race was a new record of $47.0 million, beating last year’s record of $44.0 million,” according to a statement issued by Churchill Downs.

Churchill Downs stock entered the Derby on a roll, as it was higher by 15% over the past month and 38% year-to-date. The company is readying a 2-for-1 share split later this month.

Churchill Downs Forecasts Record EBITDA

It wasn’t just Churchill’s topline that benefited from the most-watched day in horse racing. The operator expects profitability from the event to also shatter records.

Churchill Downs CEO Bill Carstanjen said in the statement that Derby Week earnings before interest, taxes, depreciation, and amortization this year could be $14 million to $16 million ahead of the record set in 2022.

In a note to clients, Jefferies analyst David Katz said the success of this year’s Derby is something Churchill Downs can replicate annually, and he expects the stock to rally following the event. He rates the stock a “buy,” with a $330 price target.

The Kentucky Oaks race, which was held the day before the Derby, was an important contributor to Churchill’s Derby Week success. That annual race, which pits the top three-year-old female horses, or “fillies,” against each other, also commanded new betting records.

“Wagering from all sources on the full Kentucky Oaks day race card set a new record of $74.9 million, beating last year’s record of $74.6 million. All-sources wagering on the Kentucky Oaks race was $22.4 million compared to the record of $24.3 million set in 2022,” according to the company.

Pretty Mischievous, owned and bred by Godolphin, LLC, won the Oaks while Kenutcky-bred Mage, owned by OGMA Investments, LLC (Gustavo Delgado), Ramiro Restrepo, Sterling Racing (Sam Herzberg) and Commonwealth Thoroughbred LLC (Brian Doxtator and Chase Chamberlin), won the Derby.

Other Potential Derby Beneficiaries

Churchill Downs is synonymous with the Derby. After all, it’s the company that puts on the event, and the track on which it’s run bears the operator’s name.

Some other operators may have wrung benefits from the 149th running of the first race in the Triple Crown series. For example, DraftKings (NASDAQ: DKNG) and PointsBet (OTC: PBTHF) rolled out horse racing apps in advance of the Derby.

Additionally, FanDuel, which is the largest online sportsbook operator in the US, actively promoted its horse wagering app in advance of the Derby.