Churchill Downs stock rating initiated at overweight by JPMorgan

Investing.com - JPMorgan initiated coverage on Churchill Downs (NASDAQ:CHDN) with an overweight rating and a price target of $116.00 on Monday. The company, which boasts a perfect Piotroski Score of 9 according to InvestingPro data, currently trades at an attractive P/E ratio of 15.8x.

The price target represents a potential 17% upside from current levels for the horse racing and gambling company, which has underperformed the broader market this year. Churchill Downs stock has declined 26% year-to-date, compared to a 5% drop for industry peers and a 2% gain for the S&P 500.

JPMorgan believes market sentiment toward Churchill Downs has become "overly negative" following concerns about the company’s capital allocation strategy and growth trajectory for its signature Kentucky Derby event.

The firm suggests that earnings estimates for Churchill Downs have likely bottomed out and that expectations are currently low, creating a favorable entry point for investors.

JPMorgan also noted that Churchill Downs has shifted its priorities toward returning capital to shareholders rather than focusing on capital investments, a change that the firm views positively.

In other recent news, Churchill Downs has been the focus of several analyst updates following the latest Kentucky Derby. Truist Securities maintained its Buy rating and a $150 price target, highlighting record betting figures during Derby Week despite challenging weather. Similarly, Stifel analysts reaffirmed their Buy rating with a $130 price target, noting management’s confidence in the Kentucky Derby’s pricing power and growth prospects at The Rose Dumfries. Meanwhile, JMP analysts adjusted their price target from $144 to $138, citing the impact of removing Historical Racing Machines in Louisiana, which could affect earnings by $10 to $15 million annually. Despite these changes, JMP maintained a Market Outperform rating, emphasizing that the removal does not reflect broader operational or legal issues. Churchill Downs reported record wagering numbers for the Kentucky Derby Day program, with total bets reaching $349 million. However, the company anticipates Adjusted EBITDA for Derby Week to be $2 to $4 million lower than the previous year due to weaker bookings and pricing challenges. BofA Securities maintained a Buy rating with a $115 target, expressing optimism about future profitability driven by new projects and media deals. Investors and analysts continue to closely monitor these developments and their implications for Churchill Downs’ financial health.

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