Shares of Churchill Downs (NASDAQ: CHDN) closed barely greater Thursday after the gaming firm reported stable fourth-quarter outcomes late Wednesday. However with these numbers previously, analysts are turning to the operator’s new venues and the potential impression these properties may have on the inventory worth.
Racehorses cross the end line at Ellis Park. An analyst stays bullish on Churchill Downs inventory. (Picture: Ellis Park)
Such venues embody The Rose Gaming Resort in Dumfries, Va., for which the operator lately gained approval to proceed with section one of many challenge. Churchill Downs can be slated to open Owensboro Racing & Gaming in Owensboro, Ky. in early 2025. That venue will function as an annex of Ellis Park Racing and Gaming, and serve to fund purses for horse races on the observe.
Though issues concerning the state of the home horseracing enterprise linger, stay and historic racing (L&H) stays a supply of energy for Churchill Downs.
Administration cited broad-based energy throughout L&H, with almost all property revenues beating our mannequin,” wrote Stifel analyst Jeffrey Stantial in a notice to shoppers. “Based mostly on our anecdotal checks, we sense this partly displays mis-modeled straightforward climate comps in December, in addition to extra impactfully tailwinds from skill-based video games being shut down in mid-November & continued ramp at key Kentucky properties.”
Stantial charges Churchill Downs inventory a “purchase,” with a $150 worth goal.
Churchill Downs Inventory A Favourite
Analysts are bullish on Churchill Downs, and that bullishness abounds despite the fact that the operator has no Las Vegas publicity, neither is it a significant participant within the realm of on-line sports activities betting.
Catalysts embody an intensive pipeline of excessive return on funding initiatives, advantages from the Exacta and P2E acquisitions, and the rising development story tied to historic horse racing (HHR) machines. Eight of the ten analysts masking the inventory fee it a “robust purchase” or “purchase,” and the consensus worth goal of $143 implies 19.31% upside from Thursday’s shut.
Progress within the operator’s TwinSpires unit and good acquisitions are among the many the explanation why Churchill Downs is amongst Wall Road’s favourite gaming names.
“The TwinSpires phase additionally beat properly with adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) of $34.9M coming in +13%/+12% to our mannequin/Consensus. Revenues had been +2% to our mannequin, and inline with Consensus. Adj. EBITDA margins of 33.5% had been effectively forward of our/Road’s 30.2%/30.1%, probably reflecting mis-modeled combine impression from Exacta,” added Stantial.
Different Potential Sparks
Whereas the primary quarter isn’t over, Churchill Downs’ second-quarter earnings might be a spark for the shares. That’s as a result of the Kentucky Derby is slated for Could, and the lodge on the operator’s Terre Haute On line casino Resort in Indiana is predicted to open later that month.
Whereas the Derby is constantly seen as a marquee occasion for Churchill Downs, this yr would be the first version of the Triple Crown race that exams new facilities on the operator’s eponymous observe. These embody further seating, a contemporary paddock, and choices for VIPs.
“For CHDN’s KY properties, This fall outcomes seem pretty inline with our mannequin normalized for mis-modeled straightforward climate comps. Turfway, Newport, Ellis, & Derby Metropolis Gaming proceed to ramp properly post-opening/acquisition/development capex, whereas the lately opened Derby Metropolis Downtown ought to see step perform development in Q2 as summer time tourism in Louisville begins, whereas the Derby additionally drives excessive visitation,” concluded Stantial.
