Stifel raises Bally’s stock price target to $19, maintains hold rating

Tuesday, Stifel analysts increased the price target on Bally’s Corp (NYSE: BALY) shares to $19.00, up from the previous $18.25, while keeping a Hold rating on the stock. The adjustment was made in anticipation of Bally’s fourth-quarter 2024 earnings report, which is scheduled for release on March 5, 2025. According to InvestingPro data, the company currently has a market capitalization of $796 million and has seen its stock decline by 25.6% over the past six months.

Stifel’s analysts updated their model to reflect state-reported gross gaming revenue (GGR) data and to account for the recent Casino (EPA:CASP) Queen merger and the Standard General tender offer that concluded on February 7, 2025. The firm’s decision to lift their estimates is based on the recent uptick in regional brick-and-mortar GGR and the sustained momentum in the U.K. internet casino gross gaming yield (GGY). InvestingPro analysis reveals that Bally’s operates with a significant debt burden, with a debt-to-equity ratio of 21.8x and total debt exceeding $5 billion. Get access to 7 more key ProTips and comprehensive financial analysis with an InvestingPro subscription.

Despite the positive developments, Stifel’s revised fourth-quarter and fiscal year 2025 adjusted EBITDAR estimates remain approximately 2% below the consensus for the Casino Queen segment. The analysts also noted that with the Standard General tender now closed, they anticipate investors will reevaluate Bally’s multifaceted narrative, especially since the post-financing (PF) float is slightly better than expected, which should help Bally’s maintain its listing on the New York Stock Exchange. The company’s last twelve months EBITDA stands at $245.5 million, with revenue reaching $2.48 billion and showing modest growth of 2.8%.

Stifel outlined the latest arguments for and against investing in Bally’s, acknowledging the balanced risk/reward profile. The high net leverage and significant contractual and planned capital expenditures are reasons for their cautious stance, even though there is potential for unlocking value through sum-of-the-parts (SOTP) valuation.

In conclusion, the target price has been adjusted to $17, as analysts no longer anchor their valuation to the previous $18.25 per share cash offer. The Hold rating has been reiterated, reflecting Stifel’s cautious but watchful outlook on Bally’s stock.

In other recent news, Bally’s Corporation has completed its merger with Standard General L.P. and The Queen Casino & Entertainment Inc., utilizing $500 million of senior secured notes to finance the transaction. This merger has led to a downgrade of Bally’s secured debt rating from ’B+’ to ’B’ by S&P Global Ratings due to concerns about recovery prospects for existing secured lenders. Despite the downgrade, other ratings for the company have been affirmed, with a stable outlook based on expected modest EBITDA growth and adequate liquidity. As part of the merger, Standard General acquired outstanding shares, becoming the majority owner with approximately 74% of the company.

Bally’s has also opened a new election period for shareholders to retain their shares instead of receiving cash merger consideration, with the deadline set for January 17, 2025. This move follows the approval of the mergers and related transactions at the Special Meeting of Stockholders. The company is planning significant capital expenditures, including a permanent casino in downtown Chicago slated for completion in September 2026. Additionally, The Queen Casino & Entertainment Inc. is working on a landside development and hotel renovation in Louisiana, expected to be completed by September 2025.

Bally’s anticipates modest organic revenue growth in its core brick-and-mortar portfolio and higher growth from its digital operations. However, the company faces execution risks in Chicago due to high gaming supply and competition. Despite operational challenges in 2024, particularly in Lincoln, R.I., and Atlantic City, N.J., Bally’s remains focused on expanding its presence and improving its financial performance.

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