Financial

Golden Entertainment Stock Glitters, Offers Big Upside, Says Analyst

Already on a torrid pace, Golden Entertainment (NASDAQ:GDEN) stock offers significant appreciation potential. That’s as the Las Vegas locals (LVLs) segment springs back to life and as more Californians flock to Nevada, among other factors, notes a sell-side analyst.

The outside of the Strat Las Vegas pictured above. An analyst sees a big upside for Golden Entertainment stock. (Image: Los Angeles Times)

B. Riley analyst David Bain initiates coverage on the Strat operator today with a “buy” rating and a 12-month price target of $48. That implies upside of 60 percent from the April 27 close. Bain’s report is having a positive impact on Golden stock, as the shares are up six percent in early trading on volume that appears poised to eclipse the daily average. The stock is higher by 58 percent year-to-date.

We believe GDEN’s locals-based gaming and entertainment portfolio uniquely and acutely correlates with short-/long-term growth drivers, though its stock valuation is over 3 turns below peers,” said the B. Riley analyst.

His earnings before interest, taxes, depreciation and amortization (EBITDA) estimates on the gaming operator for the first three quarters of this year are five, seven, and nine percent above consensus forecasts, respectively.

Las Vegas-based Golden operates 10 casinos, nine of which are in Southern Nevada, and the other is the Rocky Gap in Maryland.

Golden Stock Loving Las Vegas Locals

As is the case with many smaller gaming operators, Golden Entertainment is heavily dependent on local traffic. That makes the stock a play based on government stimulus and increasing coronavirus vaccination levels.

Bain notes the company generates 85 percent of its revenue from the LVL segment and is the dominant force in hyper-local Las Vegas gaming offerings. The company’s PT’s Entertainment unit runs more than 60 bars, pubs, and casual dining restaurants in Nevada — a plus at a time when the B. Riley analyst sees “a dynamic surge in the Las Vegas bar/tavern/route market.”

GDEN’s portfolio is currently benefiting from multiple post-COVID factors, including the return of the core older demographic to its local casinos. ~80 percent-plus of GDEN EBITDA is generated in NV (mostly local play), one of the fastest-growing populations, underpinned by migration from California,” said Bain.

More Positives for Golden Investors

Golden’s route business operates in Montana and Nevada, with Illinois and Pennsylvania possible near-term additions. Should be Pennsylvania join that fold, it could be a major catalyst for Golden stock.

“GDEN has already partnered with multiple locations, should Pennsylvania routes be approved. We calculate every 1,000 locations serviced by GDEN equate to $7.35 per share,” said Bain. “Pennsylvania’s longer-term market could host ~30,000 locations, and GDEN could service ~25% of the market, in our view.”

The gaming company also owns 17 acres of unused Strip land, which Bain says is worth $4.60 a share. Golden also owns all of the land on which its casinos operate — property worth an estimated $1.2 billion. Neither factor is accounted for in the share price, says the analyst.

Another point in favor of Golden is that, by way of a previous deal, it’s due to receive $75 million from William Hill should the British sportsbook operator be acquired. Caesars Entertainment (NASDAQ:CZR) closed its purchase of William Hill last week. Bain says that influx of cash could be used to fund return of capital to Golden investors in the fourth quarter of this year, though he didn’t specify if it’d be in the form of buybacks or dividends.

Todd Shriber

Gaming Financials, Casino Business----Todd Shriber got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long/short hedge fund, where he specialized in trading sector and international ETFs leading up to and during the financial crisis. Currently, he analyzes, researches, and writes on ETFs for a variety of Web-based publications and financial services firms. Shriber has been quoted in Barron's, CNBC.com, and The Wall Street Journal. His work has been published on sites such as Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business, and Nasdaq.com. He joined the Casino.org news writing team in 2019, and lives in Southern California, where he enjoys golf and taking his black lab to the dog park. When in Las Vegas, he likes to wager on college football, the NBA, three-card poker, and roulette, even though he knows better. Email: todd.shriber@casino.org

Share
Published by
Todd Shriber