Soon-to-Be Stratosphere Owner Golden Entertainment Reports Record Earnings, But Investors Remain Unsure

Posted on: August 7, 2017, 12:00h. 

Last updated on: August 7, 2017, 12:06h.

Golden Entertainment, the forthcoming owner of the Stratosphere, reported record earnings in the second quarter on strong slot revenue at its Nevada casinos and restaurant gaming locations.

Golden Entertainment revenue Stratosphere
Golden Entertainment is hoping to give visitors to the Las Vegas Strip reason to venture north to its Stratosphere resort. (Image: Patrick Connolly/Las Vegas Review-Journal)

Nevada’s largest tavern operator (more than 50, most under the PT brand name) and slot machine distribution subsidiary Golden Route Operations (with 10,500 devices in some 980 Nevada and Montana locales) showed net revenues totaling $110.5 million between April 1 and June 30, a 7.7 percent increase on 2016. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $15 million, with both figures setting new highs for the company. Gaming totaled $94.6 million, up seven percent.

In total, Golden oversees some 12,000 slot machines and video lottery terminals, along with 30 table games in three states: Nevada, Maryland, and Montana.

Yet despite the revenue increase, net income was down nearly 39 percent. That was attributable to several factors, including merger and acquisition expenses associated with Golden’s pending $850 million purchase of American Casino & Entertainment. Once that deal is completed, the corporation will own the Stratosphere, plus the two Las Vegas-area Arizona Charlie’s casinos and the Aquarius Casino Resort in Laughlin.

Golden Entertainment already owns three casinos in Pahrump, Nevada, and the Rocky Gap Resort Casino in Maryland.

Investors Not Sold

Golden Entertainment’s record earnings report isn’t wooing investors, however, as the publicly traded company was flat Monday on the NASDAQ. After a strong three-month surge, which saw stock go from $15 in May to over $20 this week, some shareholders are apparently taking their profits and running.

One possible concern might be Golden Entertainment’s acquisition of conglomerate American Casino and the Stratosphere.

Golden Entertainment is a slot operations leader in the country’s biggest gambling state, but to date, it’s never owned or operated a Las Vegas Strip casino. That will soon change, but investors seem to be hesitant.

Critical Months Ahead

Golden Entertainment has a proven track record owning casino resorts in Pahrump, but Pahrump is no Vegas, and the northern end of the Strip presents concerns. Traveling north past the Wynn, the Strip provides a strong reminder of the recent recession.

Resorts World remains in limbo, the Riviera is no more, Fontainebleau is unoccupied, and SLS Las Vegas has been a financial nightmare since its previous owners decided to redo the Sahara.

There’s simply not much to entice Sin CIty visitors away from their mega resorts on the Strip to the northern end. But Golden remains confident that the Stratosphere’s positioning between the bustling downtown Las Vegas area and the city’s main tourist zone will pay off in the years ahead.

“Given the recent investment activity focused on the north end of the Las Vegas Strip, we see future potential,” CEO Blake Santini said in a June presser.