Bally's Shares Decrease Due to Moderate Analyst Evaluation
One of the gaming industry's rising stars in recent weeks, Bally's Corp. (NYSE:BALY) might need to take a break, according to a certain analyst. Stifel's Steven Wieczynski resumed coverage on the regional gaming company with a "hold" rating and a $50 price target. This prediction suggests only a small increase over the current price as of December 9, 2022, which was $48.76. The less-than-enthusiastic outlook appears to be affecting Bally's shares negatively, as they dropped by 10% in midday trading.
Wieczynski praised the company's recent partnership with Sinclair Broadcast Group, giving the brand Bally's rights to 21 regional sports networks (RSNs) owned by the media company. He also approved of Bally's plan to acquire Bet.Works, a sports betting platform provider, for $125 million. He mentioned that the growth opportunities from these deals have likely been factored into the share price.
The analyst noted that BALY has impressive pro-forma growth potential, but with the shares up 89% year-to-date (S&P gaining 15%) and the potential influence of rising COVID-19 cases, he prefers to wait for a larger valuation dislocation or for BALY to reach its pro-forma potential before turning positive on the stock.
He stated that the $50 price target is based on the stock trading at 8x 2022 estimated EBITDAR. He assigned a value of $22 per share for Bally's iGaming/sports wagering business.
Conflicting Opinions
Since Bally's announced its deals with Sinclair and Bet.Works last month, analysts have generally been positive on the stock. Out of the five analysts covering it, three placed "very bullish" ratings on the name.
The average price target on the gaming stock is $55.40, which is significantly higher than Wieczynski's $50 call. This implies a 25% increase in share value at present.
Wieczynski highlights several points in favor of the company, formerly known as Twin River Worldwide Holdings (TRWH): a solid regional footprint, growth in core operations, management's swift moves into the sports betting scene, and a strong track record of smart acquisitions.
However, he points out that these positive factors are "offset by several considerations, including 1) significant share price increases have already priced in a significant sports betting/iGaming opportunity and pro-forma land-based footprint, 2) the ongoing increase in COVID-19 cases could affect near-term results, particularly considering BALY's exposure to the Rhode Island market (which is experiencing casino closures), and 3) there's still a lot of ambiguity and risk as BALY executes its new sports betting and iGaming strategy."
Moving Forward
The coming months will see Bally's busy with a major rebranding project, renaming their gaming venues with the acquired Bally's name.
The company is also working on finalizing several acquisitions that will boost their presence to 14 casinos across 10 states, which is crucial to reduce the company's reliance on the competitive Northeast market.
"We're waiting for a more opportune moment to recommend owning the stock," concludes Wieczynski.
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