Analysts say Red Rock Resorts stock could rise
Shares of Red Rock Resorts (NASDAQ: RRR ) are on a tear heading into 2024, rising 17.3% in the first quarter, outperforming multiple small-cap indexes the stock belongs to.
Some analysts believe there is further potential for the casino operator. In a note to clients on Monday, Deutsche Bank analyst Carlo Santarelli reiterated his "buy" rating on the gaming stock and raised his price target to $70 from $62. That represents nearly 17% upside potential from the March 28 closing price. This is the second time since the start of 2024 that the analyst has upgraded his price forecast for Red Rock.
We are getting more comfortable with this. 1) continued discipline driving the local market, 2) Durango continued to perform above expectations, and 3) BYD and RRR portfolio cannibalization was lower than expected," Santarelli wrote.
He noted that he raised Red Rock's earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for 2024 and 2025. Station casino operator beat Wall Street expectations with fourth-quarter EBITDA and revenue forecasts, among other things.
Durango Helps, But Won't Hurt Red Rock Stock
Red Rock's Durango Casino Resort southwest of Las Vegas opened to much fanfare in December, but there were concerns that the venue would cannibalize some of the operator's other nearby venues, namely its namesake in Summerlin Casino resort.
That's not the case, and rival Boyd Gaming (NYSE: BYD ) said there's little sign of a negative impact on its Durango-area casinos. However, it is undeniable that Hongyan's latest portfolio expansion is off to a good start and has certain geographical advantages.
The recently completed first quarter marked Durango's first full three months of operations, and investors will learn how the venue impacted Red Rock's sales and profits when the operator reports first-quarter results on May 1.
"Given the fundamental stability of the local LV market, better-than-expected performance in Durango, and the pipeline of future development project opportunities available to management, we continue to view RRR as the best manageable organic growth story within our coverage universe. " Santarelli added.
More Bullish Rumors About Red Rock Stock
Some analysts had previously predicted that Durango's visitor numbers would plateau at 10,000 per day, underscoring Red Rock's already dominant position in the sought-after Las Vegas local market. All of the operator's venues and planned projects are located in the rapidly growing Las Vegas Valley.
JPMorgan forecasts Red Rock first-quarter real estate EBITDA of $242 million, assuming Durango contributes $38 million and same-store sales decline 6%.
The bank reiterated its "overweight" rating on the stock and raised its price target to $69 from $63. She noted that she expects Redstone's prospects to continue to be "brighter compared to its peers."
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Source: www.casino.org
