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On Friday, Mizuho (NYSE:MFG) Securities adjusted its price target for Churchill Downs (NASDAQ:CHDN), a gaming and horse racing company, to $137.00, down from the previous $140.00. The stock, currently trading at $87.99 and near its 52-week low, appears undervalued according to InvestingPro analysis. Despite the reduction, the firm maintained its Outperform rating on the stock. Mizuho’s analysis followed the company’s recent earnings report, which presented mixed results in comparison to both Mizuho’s and the broader market’s expectations.
Churchill Downs reported its Live and Historical Racing (L&HR) EBITDA at $102.0 million, which aligned with Mizuho’s forecast but fell short of the consensus estimate of $104.2 million. The Gaming EBITDA was reported at $123.5 million, slightly below Mizuho’s projection of $126.6 million and the Street’s expectation of $126.3 million. The underperformance was attributed to challenges faced at the Rivers JV and increased competition affecting the company’s Oxford operation.
The firm noted that the stock was likely pressured by what was perceived as somewhat positive positioning prior to the earnings release. Additionally, the company’s forward-looking statements regarding consumer trends and the Kentucky Derby were less optimistic than anticipated. Mizuho had previously lowered its forward estimates for Churchill Downs in anticipation of a potential deceleration in underlying growth, a revision that is now thought to be reflected more broadly in the stock price.
Mizuho believes that with estimates potentially reset and the stock’s multiple having compressed, the long-term investment profile and earnings growth prospects for Churchill Downs remain stable. This, according to the firm, may present an attractive entry point for investors. The company’s portfolio includes the "trophy" asset, the Kentucky Derby, which is considered a significant draw for the business. Despite the lowered price target, Mizuho’s Outperform rating aligns with the broader analyst consensus, which remains highly bullish. InvestingPro analysis reveals a perfect Piotroski Score of 9, indicating strong financial health, with 13 additional ProTips available to subscribers. The company’s attractive PEG ratio of 0.61 suggests the stock is trading at a discount relative to its growth potential.
In other recent news, Churchill Downs Incorporated reported its first-quarter 2025 earnings, which revealed a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $1.02, falling short of the forecasted $1.11, while revenue came in at $642.6 million, below the expected $649.69 million. Despite these misses, Churchill Downs achieved record first-quarter net revenue of $643 million and adjusted EBITDA of $245 million. In response to macroeconomic uncertainties, the company announced the postponement of a major $900 million project at Churchill Downs Racetrack, opting instead for a smaller-scale project costing between $25 and $30 million. Stifel analysts maintained their Buy rating on the stock with a price target of $142, noting the strategic shift as a cautious move amid economic volatility. The company also highlighted robust growth in its Kentucky operations and progress in its Virginia HRM properties. Churchill Downs has revised its 2025 capital spending projections, reducing both maintenance and project capital expenditures. Despite the economic challenges, the company remains focused on organic growth and potential expansion in the New Hampshire market.
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