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On Thursday, Stifel reaffirmed its Buy rating and $164 price target for Churchill Downs (NASDAQ:CHDN), following a property tour of the new $460 million The Rose casino-resort in Dumfries, Virginia. The tour, led by Churchill Downs management and property leadership, provided insights into the company's performance and future prospects.
With a current market capitalization of $9.5 billion and strong financial health according to InvestingPro analysis, Churchill Downs continues to attract analyst attention. InvestingPro's comprehensive analysis reveals 10+ additional investment insights available to subscribers.
The analyst noted that while initial financial disclosures for The Rose were limited and not entirely clear, management's outlook was positive, especially regarding early demand trends. This optimism suggests potential for earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) to surpass the consensus estimates for 2025 and 2026. The company's current EBITDA stands at $875.8 million, with revenue growing at 12.2% over the last twelve months.
Churchill Downs' ongoing capital projects are expected to continue as planned. Additionally, there is a possibility for new legislation that could allow for increased gaming capacity in Virginia. The company's growth in gross gaming revenue (GGR) was highlighted, with a notable uptick observed in November. This increase was partially attributed to the number of days in the month but also to a surge in consumer spending following the elections, particularly among the lower-income demographic.
The firm considers Churchill Downs to be a top pick within the regional gaming operator sector as it moves into 2025. The optimism is based on the company's unique potential for upward adjustments to consensus estimates for 2025 and 2026, as well as the opportunities for capital expenditures and possible expansion into new markets with historical horse racing (HHR) gaming.
In summary, Stifel's reiterated Buy rating and $164 price target for Churchill Downs reflects confidence in the company's current projects and the potential for legislative developments that could further enhance its gaming operations in Virginia.
In other recent news, Churchill Downs Incorporated has reported record net revenue and adjusted EBITDA for its third quarter, marking a 10% increase in revenue and an 8% growth in adjusted EBITDA year-over-year.
The company's Live and Historical Racing and Gaming segments, particularly the expansion of the Kentucky Derby experience and the opening of new Historical Racing Machine (HRM) properties in Virginia, were significant contributors to this success. Truist Securities, after reviewing the Q3 results, adjusted its outlook on Churchill Downs, reducing the price target slightly to $165 from the previous $166 but reaffirmed a Buy rating on the stock.
Meanwhile, CapitalOne maintained an Overweight rating, citing the recent announcement of a significant renovation and development initiative at the Churchill Downs Racetrack. The company also reported a record $591 million in free cash flow for the first nine months of the year, a 32% increase compared to the previous year.
Other recent developments include the approval of a 7% dividend increase by the Board, set to be paid in early 2025, and plans to expand its HRM presence with new venues in Richmond, Owensboro, and Calvert City. Despite a slight decline in same-store margins at regional gaming properties and slower post-COVID recovery at Derby City Gaming, the company's strategic expansions and operational optimizations are set to continue.
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