Analysts Endorse VICI Properties Before Pending Earnings Report
Stock of VICI Properties (NYSE: VICI) climbed on Monday, following Jefferies analyst David Katz maintaining a favorable stance on the real estate investment trust (REIT), ahead of its upcoming Q2 financial release.
Katz mentioned that his team adjusted their models for VICI, taking into account rent increases at Caesars Palace on the Vegas Strip, as well as rental income at The Venetian tied to the $700 million in financing extended by landlord Apollo Global Management (NYSE: APO) to the operator to boost the venue. Jefferies now projects VICI to report revenue of $3.98 billion in 2025.
The analyst values the company using the same blended multiples based on 2024/2025 earnings – 18x enterprise value/EBITDA, 19x price/AFFO (acquired funds from operations), and 16x price/free cash flow – which are comparable to triple net REITs with a lengthy past performance, without considering VICI’s growth potential and future prospects. As the company broadens its roster of tenants and pursues profitable deals, Katz anticipates the disparity between the multiples will lessen over time.
Katz reconfirmed a $43 price goal for the REIT, suggesting an increase of 53% from the closing price on June 21. VICI's presumed Q2 earnings date is July 24.
VICI May Disclose Info on Caesars’ Indiana Options
Katz also informed clients that VICI might utilize the Q2 report to enlighten investors regarding the potential for exercising its option to acquire Caesars Entertainment’s (NASDAQ: CZR) Centaur Holdings, the parent company of Harrah’s Hoosier Park and Horseshoe Indianapolis (previously known as Indiana Grand).
When Eldorado Resorts proposed its $17.3 billion acquisition offer for the "old Caesars" in June 2019, they negotiated a deal with VICI, allowing the gaming company to sell or the REIT to acquire those assets between January 1, 2022, and December 31, 2024.
With Caesars aiming to decrease its overall debt and management previously suggesting asset sales of nonessential properties, there has been some discussion that this could be the year VICI acquires the real estate assets of those venues or Caesars hands them over to the REIT.
Harrah’s Hoosier Park and Horseshoe Indianapolis, two of Caesars’ four Indiana casinos, became part of the old Caesars through Caesars' $1.7 billion buyout of Centaur Holdings in November 2017. The other properties under Caesars' control in Indiana are Horseshoe Hammond and Caesars Southern Indiana. Caesars and MGM Resorts International (NYSE: MGM) are VICI’s largest tenants.
VICI Could Share Updates on Other Opportunities
Besides the probable revelation of VICI's intentions for Centaur Holdings, Katz pointed out that the REIT might also share news on its non-gaming activities, such as its collaboration with bowling alley operator Bowlero and the Kansas City sports complex.
Katz also expects updates on VICI's plans for acquisitions in the gaming and experiential sectors, as well as potential additional financing deals like the one at The Venetian.
Given the interest rate sensitivity of the real estate sector, there's a chance VICI management will also address their viewpoint on interest rates during the earnings call.
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