Post-Q3 earnings, analysts show optimism for Red Rock Resorts' stock.
In spite of a gloomy day for video game stocks, Red Rock Resorts' (NASDAQ: RRR) shares climbed a tad following the company's satisfactory third-quarter results on Thursday night.
The Station Casinos owner reported earnings of $0.60 per share on sales of $411.6 million during the July to September period. Wall Street projected earnings of $0.39 on sales of $412.2 million. While concerns in the investment world exist about how regional gaming stocks may be affected by macroeconomic issues, some analysts maintain that these concerns are already factored into Red Rock shares and that the company could endure thanks to the robust performance in the Las Vegas locals market.
Although there might be reluctance in the short term to acquire RRR shares due to a range of macroeconomic reasons, Stifel analyst Steven Wieczynski remains cautiously optimistic about the company. He designated Red Rock a "hold" and trimmed his price objective on the stock to $47 from $51, but the new target still implies a gain of more than 10% from the current level.
In contrast to traditional Strip runners like Caesars Entertainment and MGM Resorts International (NYSE: MGM), Red Rock provides a distinct approach that involves less volatility. According to Wieczynski, Red Rock's balance sheet is "much healthier" than its peers, and the operator surpasses its rivals in terms of converting EBITDA into free cash flow - a competitive edge that might benefit them in the long run.
There are also Las Vegas-specific macro trends that could drive Red Rock's stock price upward over the long term. One such factor is the city's quick population growth, which is advantageous for a gaming operator with all its locations in the Las Vegas Valley.
"We believe the economic boosts that fueled the explosion in the greater Las Vegas economy before COVID-19 have a structural element (favorable tax code, expanding retiree base, diversifying economy/labor force) and thus should remain robust. This will likely put RRR's EBITDA flow-through in a superior position moving forward," stated Wieczynski. "Las Vegas's unemployment trends are also favorable, along with a growing population, which is good news for RRR."
Durango Could Be a 2024 Driving Force for Red Rock
Despite a slight delay in the opening of Durango to December 5 from November 20, CBRE analyst John DeCree stays firm on a "buy" rating for the stock, emphasizing that the new casino resort could boost RRR's free cash flow and aid in its deleveraging process.
Furthermore, DeCree highlighted Red Rock's ownership of the real estate beneath its gambling establishments and hundreds of acres of unused land in the Nevada metropolis as a positive and less volatile characteristic of the stock when compared to its rivals.
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Source: www.casino.org
