Barclays cuts Bally’s Corp stock price target to $14

On Friday, Barclays (LON:BARC) analyst Brandt Montour adjusted the price target for Bally’s Corp (NYSE: BALY) shares, reducing it to $14.00 from the previous $18.00, while maintaining an Equalweight rating. The stock currently trades at $12.53, with analyst targets ranging from $14 to $19. According to InvestingPro data, the stock has experienced significant pressure, falling over 30% in the past week and 43% over the last six months. The revision follows Bally’s fourth-quarter EBITDAR performance, which fell short of consensus expectations by 10%, primarily due to weaker results in the Casino (EPA:CASP) & Resorts segment, though this was somewhat mitigated by stronger-than-anticipated outcomes in the International Interactive division.

Montour’s analysis included an updated model for Bally’s post-merger with the Queen, noting that the merger’s full financial implications for the last fiscal year have not been fully disclosed due to the cancellation of Bally’s fourth-quarter earnings call. The company’s financial health deserves close attention, as InvestingPro analysis shows a significant debt burden with a debt-to-equity ratio of 21.8x and short-term obligations exceeding liquid assets. Get access to 10+ additional ProTips and comprehensive financial analysis with InvestingPro. Despite this, Montour believes there is sufficient information to revise the model. The updated estimates incorporate the performance of the legacy Queen properties, which are expected to contribute significantly to future revenue and EBITDAR.

The Barclays analyst anticipates growth for the combined entity, with particular improvements expected for the Belle of Baton Rouge and Queen Marquette following their land-based relocations. However, Montour also projects continued challenges for Bally’s legacy properties in Rhode Island and Atlantic City. The forecast for fiscal year 2025 sees a total Casino & Resorts EBITDAR after the merger reaching $455 million.

Montour further detailed changes in the company’s financial structure post-merger, including an increase in total debt by $500 million to reflect the issuance of Senior Notes ’28, used for completing the tender offer, and a relatively stable cash position. The company generates annual revenue of $2.48 billion with a gross profit margin of 54.4%, though InvestingPro’s analysis indicates the company isn’t currently profitable, with a negative return on equity of -135%. Access the full Pro Research Report for deeper insights into Bally’s financial health and growth prospects. The updated model also assumes a post-merger share count of approximately 60 million.

In addition to the Casino & Resorts segment, the Barclays analyst revised the model for Bally’s International Interactive segment, accounting for a licensing fee resulting from the spin-off of its Asia business. Growth projections for the UK and Spain markets were set at 10% for fiscal year 2025, and adjustments were made to the rent expense to reflect new financial commitments, including construction financing for the Chicago project and incremental rent for sale-leaseback transactions of properties in Kansas City and Shreveport.

In other recent news, Bally’s Corporation reported fourth-quarter revenue of $580.4 million, falling short of the analyst consensus estimate of $610.63 million. This represents a 5.1% year-over-year decline. The Casinos & Resorts segment saw a revenue drop of 5.2% to $324.4 million, while International Interactive revenue decreased by 9.1% to $214.5 million. Despite these challenges, North America Interactive revenue increased by 24.4% to $41.5 million, although it still posted an adjusted EBITDAR loss of $12.3 million for the quarter. Bally’s also highlighted growth in its U.K. online revenue, which rose by 11.3% year-over-year.

Stifel analysts recently adjusted their outlook on Bally’s, cutting the stock target from $17.00 to $14.00 while maintaining a Hold rating. This adjustment follows the company’s decision not to provide financial guidance for FY25 and cancel its earnings call, reflecting uncertainties in forecasting. Bally’s has been dealing with trading volatility, attributed to limited trading liquidity and high net leverage. The company has completed transactions with Standard General and The Queen Casino & Entertainment, adding four new properties to its portfolio. Management expressed optimism about these deals, suggesting they will support long-term growth by expanding Bally’s geographic footprint.

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