Full House Stock Could Be Royal Flush for Investors

With a market capitalization of just $186.43 million, Full House Resorts (NASDAQ:FLL) stock is one of the smallest publicly traded domestic gaming equities.

A closing handle of $7.14 on Feb. 26 only adds to that diminutive status. But one analyst sees the regional gaming company shedding those tiny figures. In a note to clients earlier this week, Roth Capital analyst David Bain reiterated a “buy” rating on the stock, while lifting his price target on the shares to $14 from $9, implying the shares can nearly double.

Part of Bain’s enthusiasm for the shares is derived from expansion plans at the Bronco Billy’s property in Cripple Creek, Colo.

Full House has spent $10 million and earmarks an additional $180 million for ~300 rooms and suites, ~720 gaming positions ~300 parking spots and other amenities,” writes the analyst. “Bronco Billy’s also benefits from legislative gaming expansion allowing new table game offerings, such as baccarat and pai gow poker, and removal of the $100 betting limit beginning May 2021.”

Last November, Colorado voters approved Amendment 77, allowing for higher bet limits and new table games in the gaming towns of Black Hawk, Central City, and Cripple Creek.

More Factors Favoring Full House Stock

Bain notes his $14 projection for Full House stock assumes a 15 percent return on investment from the Bronco Billy’s expansion, which the analyst says is the “low case.”

Combined, he sees online casinos and the Waukegan project adding $7 to his $14 target, meaning Full House could nearly triple from the Feb. 26 close.

Because of the COVID-19 pandemic, the Illinois Gaming Board (IGB) hasn’t made a call on Waukegan bids. That decision is expected later this year. Previous speculation indicated Full House’s proposal was leading the pack.

The Nevada-based company’s roster is currently small, consisting of just five venues, one each in Colorado, Indiana, Mississippi, and a pair in its home state.

Stock Is Inexpensive

Despite a gain of more than 2,200 from its March 2020 lows, and the potential to more than double or triple, Full House isn’t a richly valued name. In fact, data suggests it’s cheap.

Accounting for a “normalized post-Bronco Billy’s expansion,” Full House trades at 5.3x estimated 2023 earnings, compared to an average of more than 10x for the broader regional casino peer group, says Bain.

Even a jump to a multiple of 7.5x — still a discount to rivals — means Full House would trade at $14, according to the analyst.