VICI Properties Stock Slump Presents Buying Opportunity, Says Analyst

VICI Properties (NYSE:VICI) stock is off almost 10 percent over the past month. But that slide could present investors with an opportunity to get involved with shares of the casino landlord, according to one analyst.

In a note to clients today, KeyBanc analyst Todd Thomas upgrades the gaming real estate investment trust (REIT) to “overweight” from “sector weight” with a $33 price target. That implies upside of nearly 14 percent from the Oct. 5 close.

Figuring prominently in the stock’s recent weakness is a flood of new share issuance. Last month, VICI sold $3.6 billion in equity to fund previously announced plans. That dilutes current investors, but the selloff is facilitating “a very attractive entry point,” says Thomas.

In March, the real estate company partnered with private equity firm Apollo Global Management (NYSE:APO) to acquire Venetian, Palazzo and Sands Expo and Convention Center from Las Vegas Sands (NYSE:LVS) for $6.25 billion. VICI is shelling out $4 billion for the property assets. The gaming REIT is directing proceeds from the September share sale to finance that deal.

VICI Stock Still Attractive

While VICI is mired in a slump, the Caesars Palace owner has a knack for savvy deal-making. Although it’s digesting multiple transactions today, it could remain a player for gaming and non-gaming real estate assets, according to KeyBanc’s Thomas.

While growth off a relatively larger [real estate] base makes it more difficult, VICI’s appetite remains healthy, with the investment landscape still ripe for both gaming and non-gaming investments in the United States and abroad,” said the analyst.

As the recent sale of the Cosmopolitan confirms, appetite for Las Vegas gaming properties remains strong, and market observers expect that as the US gaming industry continues rebounding from the coronavirus pandemic, more regional casinos – of which VICI owns an extensive portfolio — could hit the market.

In August, the gaming landlord said it’s acquiring rival MGM Growth Properties for $17.2 billion in stock. The transaction created the largest owner of Las Vegas Strip casino real estate. VICI is taking on $5.7 billion in MGP debt in that deal.

Future Upgrade for VICI

VICI currently owns the property assets of 28 gaming venues with its tenant roster, including Caesars Entertainment, Century Casinos, and Penn National Gaming, among others.

The stock yields 4.99 percent, or more than double the dividend yield on the MSCI US Investable Market Real Estate 25/50 Index.