“Boyd Stocker crashes in Las Vegas’ up-and-coming locals”
Increasing competition in the local Las Vegas market, particularly from Durango casinos and resorts, is one of the reasons why Boyd Gaming Inc. (NYSE: BYD) missed first-quarter profit expectations, That led to a massive sell-off in the stock today.
The region's casino operator said it earned $1.51 per share in the first three months of the year on a non-GAAP basis. Analysts expected earnings of $1.59 per share. Affected by this, Boyd's stock price fell, with the stock price falling 15.44%, and the trading volume exceeded 8 times the average daily trading volume.
Boyd pointed to inclement weather affecting venues in the Midwest and South, as well as "increased competitive pressure in the Las Vegas local market" as reasons for "a challenging start to the year." Red Rock Resorts' (NASDAQ: RRR) Durango casino resort southwest of Las Vegas opened in December and is a major source of new competition for Boyd Las Vegas hotels , but promotions from other competitors also had an impact on Boyd.
The good news is that our main competitor, despite opening a new hotel, hasn't really ramped up its promotions. "I think some of the properties around Orleans and the Gold Coast are being promoted more heavily in late 2023 and 2024," Boyd CEO Keith Smith said in response to a question from Stifel analyst Steven Wieczynski on the company's conference call. had an impact on the market. ""
Smith did not identify any specific small operators that are increasing promotions. Wieczynski reiterated his hold rating on Boyd stock and lowered his price target to $65 from $71.
Insider Selling Could Signal Weakness in Boyd Stock
In February and March of this year, Boyd insiders, including the Smith and Boyd families, sold $53.4 million worth of stock. In hindsight, this may have been a sign that the operator was expecting tepid first-quarter results.
Smith acknowledged to JPMorgan analyst Joseph Grave on the call that competitive pressure from Durango was more pronounced in March than in January and February. Smith told analysts that starting this quarter, Boyd doesn't think this weakening trend in the local Las Vegas market will reverse, but it won't accelerate either.
"However, in addition to us and our largest competitors, there are other competitors in the market who will respond to this new competition differently than we do," Chief Financial Officer Josh Hirsberg said . "What we're trying to say is, these are the people who have an impact on our business, and Durango probably has less of an impact, so you can get a sense of what's going on in the market."
Although Boyd didn't mention it specifically, Durango's quick start may have been a driving force behind plans announced last month for major renovations at the Suncoast Hotel & Casino in suburban Las Vegas -- one of Boyd's venues, Closest to Durango.
Hongyan also punishes
While Boyd acknowledged that Durango has brought some competitive pressure to the Las Vegas local market, the comment does Red Rock's stock no favors. In fact, the stock is down 8.67% today on volume that's more than double its average daily volume, perhaps reflecting Boyd's comments about ad spending by small independent businesses in Las Vegas.
As for Boyd, Stifel's Wieczynski believes the operator's solid balance sheet and impressive free cash flow (FCG) generation could make it one of the safer stocks among regional casino stocks.
"Given BYD stock's free cash flow yield of approximately 9%, we believe it is only a matter of time before investors realize and understand that its share price continues to be undervalued relative to peers," the analysts concluded.
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Source: www.casino.org
