Golden Entertainment Stock Sports Golden Discount, Says Analyst

• “Boring is not bad” as it relates to Golden stock, says analyst
• Las Vegas locals visitation remains robust

Down about 7% year-to-date, Golden Entertainment (NASDAQ: GDEN) is lagging other operators with Las Vegas locals exposure, but at least one analyst believes the stock presents opportunity.

In a note to clients today, Texas Capital analyst David Bain rated the Strat operator a “buy” with a $39 price target, implying upside of 32.4% from where the shares reside at this writing. He said the stock is undervalued, particularly when accounting for the operator’s free cash flow (FCF)-generating capabilities.

Sometimes, ‘boring’ is not bad, in our view, particularly when it includes near peer-low net leverage, unlocked property value, highly visible FCF generation, potentially accelerating share repurchases and a 3.4% dividend yield,” observes Bain.

In recent years, Golden has been active on the shareholder rewards front, significantly reducing its shares outstanding tally via repurchases while instituting a quarterly dividend in March 2024. Those moves underscore the robust health of the operator’s balance sheet.

Golden Stock Could Benefit from Las Vegas Locals Outlook

The Strat is Golden’s marquee property and while it’s not officially located on the Las Vegas Strip, it’s close and is affected by trends in the US casino hub.

“We believe GDEN’s Las Vegas Locals division remains strong, and while GDEN’s hyper local tavern business continues at lower than historical margins as it refines newly acquired locations to its best practices, underlying trends are stable ahead of Social Security and ‘no tax on tips’ benefits,” notes Bain.

There’s credibility in that thesis because when it delivered second-quarter results last week, Boyd Gaming (NYSE: BYD) highlighted strength in its Las Vegas locals segment. It’s possible that theme matriculates over to other operators, including Golden.

Golden Entertainment Stock Could Be Long-Term Winner

Recently, Golden Entertainment stock has been something of a battleground with some analysts taking bullish views on the name, citing in part compelling valuation, while others from the sell-side have noted too much Las Vegas exposure and waning odds of mergers and acquisitions are headwinds.

Golden does rely on Las Vegas for the bulk of its earnings and revenue, but some investors may not be fully appreciating the facts that the company’s gaming taverns are strewn across Nevada and it’s the dominant operator in Laughlin and Pahrump. Overall, Golden’s Nevada exposure could be a favorable long-term trait.

“We believe GDEN’s Nevada-centric, Strip and Locals segmented portfolio captures greater long-term growth potential than geographically-disperse regional peers,” concludes Bain. “Further, GDEN’s low leverage, visible cash flow, and real estate holdings offer transformative stock upside optionality.”