Red Rock Resorts Price Target Upgraded on Strength of Las Vegas Locals
Red Rock Resorts (NASDAQ: RRR ) continues to be favored by sell-side analysts, with another raising its price target on the casino operator.
Deutsche Bank analyst Carlo Santarelli noted the strength of the local Las Vegas market and the potential upside that could come from the New Durango casino and resort in southwest Las Vegas . He raised his price forecast for Red Rock to $62 from $54. The new target implies 16% upside potential from Tuesday's closing price.
We expect local LV segment performance in 4Q23 may exceed market expectations and lead to higher reserve-adjusted EBITDA. "Additionally, we believe consensus forecasts for 2024 are achievable, if not exceeded, if market fundamentals remain broadly stable," Santarelli wrote in a note to clients on Wednesday.
$750 MILLION Durango has been open for nearly seven weeks, and it's generally considered a good start. Durango features 73,000 square feet of gaming space, a sportsbook, 2,000 slot machines and 40 gaming tables, as well as multiple restaurants. Some analysts believe the new casino resort could be a thorn in the side of Las Vegas rivals, including Boyd Gaming Inc's (NYSE: BYD ) Orleans and Suncoast locations.
Durango impressed in first game
Some market watchers are concerned that the new Durango Red Rocks hotel and casino of the same name in Summerlin could take away business. Executives at the gaming company acknowledged that could be an issue in Durango's infancy, but believed Red Rock supporters could return to the venue at some point.
Durango's location may alleviate those concerns. The southwest corner of Las Vegas is experiencing significant population growth, but is not yet saturated with casinos. This fact was an important part of the thesis behind the Durango site selection, as for many area residents the new site will be closest to where they live.
"We believe trends in Durango remain stable and are supported by continued strength in the local LV market. As a result, we reiterate our Buy rating, increase our price target and increase our forecasts," Santarelli added.
Of the 13 analysts covering Red Rock, 9 rate the stock a Strong Buy or Buy. The stock's consensus price target is $55.38, indicating room for an upward revision.
Red Rock is a story full of catalysts
Red Rock shares are up 5.07% over the past week, and near-term catalysts are emerging that could fuel further gains.
These include the release of Nevada Gaming Control Board (NGCB) December gross gaming revenue (GGR) data next week, which will include three weeks of action in Durango, as well as Red Rock’s fourth-quarter earnings report on Dec. 7. As a caveat, the operator missed its revenue guidance for the second and third quarters of 2023. Still, there are reasons to like this stock.
“Our Buy rating is affirmed with near-term catalysts for Q4 2024 earnings on February 7, 2024, and we believe: 1) RRR has the strongest organic growth pipeline in gaming, 2) LV- “The local market remains desirable against the backdrop of current industry valuations, the broader regional gaming landscape and 3) valuations remain attractive,” Santarelli concluded.
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Source: www.casino.org
