Churchill Downs stock rating reiterated at Market Outperform by JMP

Investing.com - JMP Securities has reiterated its Market Outperform rating on Churchill Downs (NASDAQ:CHDN) with a price target of $138.00, according to analyst Jordan Bender. The company, currently trading at $105.30, shows strong potential according to InvestingPro data, with a perfect Piotroski Score of 9 and analysts maintaining a strong buy consensus with targets ranging from $115 to $154.

The firm maintains its positive outlook on the horse racing and gambling company, noting that providers in this sector require volume under the take-rate model, similar to poker operations.

TwinSpires, Churchill Downs’ horse racing platform, represents approximately 10% of the company’s projected 2024 revenue, making it a significant but not dominant segment of the business.

JMP highlighted that Churchill Downs maintains a diversified customer base that includes international VIP players who are not subject to certain tax adjustments affecting the industry.

The analyst also mentioned Flutter (NYSE:FLUT), which operates TVG racing platform, noting it has a Market Outperform rating with a $301 price target, though its horse racing exposure represents only about 1% of its expected 2024 revenue.

In other recent news, Churchill Downs has been the focus of several analyst evaluations and strategic developments. Truist Securities maintained its Buy rating with a $150 price target, despite the company facing challenges like inclement weather during the latest Kentucky Derby, which led to a $2 million to $4 million decrease in EBITDA compared to the previous year. This Derby, however, set new records in betting, with $349 million wagered on Derby Day and $473.9 million for Derby Week. Similarly, Stifel analysts reaffirmed their Buy rating and a $130 price target, highlighting confidence in the company’s strategic outlook and potential for growth in Virginia and Kentucky.

JMP analysts, while maintaining a Market Outperform rating, reduced their price target for Churchill Downs from $144 to $138, following management discussions and revised earnings estimates. This adjustment is partly due to the removal of Historical Racing Machines in Louisiana, which is expected to impact EBITDA by $10 million to $15 million annually. Meanwhile, JPMorgan initiated coverage with an overweight rating and a $116 price target, suggesting that earnings estimates have likely bottomed out, creating a favorable entry point for investors. They noted a shift in the company’s focus toward returning capital to shareholders, which they view positively.

Despite these developments, Churchill Downs anticipates that Adjusted EBITDA for Derby Week will be slightly lower than last year’s exceptional earnings, as noted by BofA Securities, which maintained a Buy rating and a $115 price target. The company remains optimistic about future profitability, driven by potential pricing adjustments and upcoming projects. These recent developments reflect a complex financial landscape for Churchill Downs, with analysts expressing varied confidence in its future growth and strategic direction.

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