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On Monday, Mizuho (NYSE:MFG) analysts upgraded Red Rock Resorts (NASDAQ: NASDAQ:RRR) stock rating to outperform from neutral. The analysts set a new price target of $50.00, reflecting optimism about the company’s prospects. According to InvestingPro data, the company maintains impressive gross profit margins of 66.59% and currently trades near its Fair Value estimate.
The upgrade is based on several factors. Analysts believe the construction disruption affecting the company is now well understood and reflected in market estimates. They also suggest that while the challenges from ongoing projects are known, the potential return on investment from these constructions may not be fully anticipated. The company’s strong financial health, rated as GOOD by InvestingPro, supports its ability to manage these investments effectively.
Another factor influencing the upgrade is the potential benefit from legislative changes, specifically the "Big Beautiful Bill," which eliminates taxes on tips and overtime. These changes are expected to favor Red Rock Resorts’ target market, particularly in Las Vegas. The company has demonstrated financial stability by maintaining dividend payments for 10 consecutive years, with a current dividend yield of 4.16%.
Additionally, analysts note that the earnings acceleration from the North Fork management agreement may not be fully included in current market estimates. This potential for increased earnings is a key reason for the positive outlook on Red Rock Resorts.
Overall, the analysts at Mizuho express confidence in Red Rock Resorts’ future performance, leading to an upgrade in the stock rating and a revised price target.
In other recent news, Red Rock Resorts reported its Q1 2025 earnings, revealing an earnings per share (EPS) of $0.75, significantly surpassing the forecasted $0.48. The company’s consolidated net revenue reached $497.9 million, slightly missing the expected $499.25 million. Despite the revenue shortfall, Red Rock Resorts’ Las Vegas operations saw a 1.9% year-over-year revenue increase, supported by strategic expansions and renovations. The company is actively involved in significant capital projects, including a $750 million tribal casino development. Analysts have noted the company’s positive outlook, with plans for substantial capital expenditures in 2025 and a declared special dividend of $1 per share. Red Rock Resorts’ management highlighted the continued success of the Durango Casino (EPA:CASP) Resort as a key component of their long-term growth strategy. Furthermore, the company successfully closed construction financing for the North Fork project, marking a major milestone in their tribal development efforts.
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