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On Monday, Stifel maintained a positive outlook on shares of Churchill Downs (NASDAQ:CHDN), raising the stock's price target to $160 from $153, while reiterating a Buy rating. The firm's analyst adjusted the model ahead of the company's second-quarter 2024 earnings report, which is expected to be released after the market closes on July 24, with a conference call scheduled for the following morning on July 25.
The updated price target reflects the analyst's anticipation of the company's continued growth, particularly in high-margin areas such as Kentucky and Virginia Historical Racing Machines (HRM) and Exacta systems.
The adjustments were made to align with the most recent state-reported Gross Gaming Revenue (GGR) and horse racing data. Despite the changes, the projected Adjusted EBITDA for Q2 remains consistent with the consensus.
Churchill Downs shares have shown strong performance in the past three months, gaining 18% compared to a mixed performance of peers and a 11% increase in the S&P 500. This growth is attributed to a variety of factors, including organic growth in Kentucky and Virginia HRM, successful results from the 150th Derby, a promising start for the Exacta system, and resilience of the River's casino against competitive openings.
Stifel has recently removed Churchill Downs from its select list due to the stock's recent outperformance, but continues to favor the company within the regional operator sector. The firm's preference is based on unique organic growth drivers, a high-return project pipeline, and strategic positioning in the niche yet expanding HRM market. The new target price of $160 underscores the firm's confidence in Churchill Downs' future prospects.
In other recent news, Churchill Downs Incorporated reported higher-than-anticipated revenue and EBITDA for the recent quarter, with revenue reaching $591 million and EBITDA at $242.5 million, according to Mizuho Securities.
The firm has adjusted its price target for the company's shares to $143.00, up from the previously set $142.00, while maintaining a 'Buy' rating. Churchill Downs' strong performance in the Live and Historical Racing (L&HR) segment, reporting $100.8 million in revenue, was particularly noteworthy.
On the other hand, Churchill Downs, a major player in the Historical Horse Racing (HRM) market, is expected to complete its capital expenditure cycle by the third quarter of 2024. This is anticipated to lead to an increase in EBITDA and free cash flow, and a reduction in leverage, according to JMP Securities.
The firm also highlighted the company's strategic initiatives, such as the Dumfries project in Virginia and the acquisition of Exacta, which are expected to provide high EBITDA returns.
Moreover, analysts maintain a Market Outperform rating for Churchill Downs, with a price target of $150.00. The company's expansion plans, partnerships with prominent gaming companies like DraftKings (NASDAQ:DKNG) and FanDuel, and the upcoming 150th running of the Kentucky Derby are seen as potential drivers for sustained growth. These are recent developments that investors should be aware of.
InvestingPro Insights
As Stifel maintains a bullish stance on Churchill Downs (NASDAQ:CHDN), the company's financial health and market performance continue to be areas of interest for investors. Notably, Churchill Downs has a robust market capitalization of $10.26 billion, indicating its significant presence in the market.
Furthermore, with a P/E ratio of 30.53 and an adjusted P/E ratio for the last twelve months as of Q1 2024 at 27.9, the company trades at a premium relative to earnings, which may reflect the market's optimism about its growth prospects.
InvestingPro Tips reveal that Churchill Downs has a history of raising its dividend, doing so for 13 consecutive years, and has maintained dividend payments for an impressive 50 years. Additionally, two analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook on the company's financial performance.
For investors seeking more insights, there are additional InvestingPro Tips available, which can be accessed with a subscription. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
InvestingPro Data further highlights that the company's revenue growth for the last twelve months as of Q1 2024 stands at a robust 24.33%, with a gross profit margin of 32.45%. These metrics, along with a strong return of 16.04% in the past three months, underscore the company's financial strength and market performance. With the upcoming earnings report on July 24, investors will be keen to see if these trends continue to support the positive outlook reflected in the analyst's raised price target.
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