Golden Entertainment Stock Shines Way to New Highs

Golden Entertainment (NASDAQ:GDEN) is soaring Friday, adding to an already blistering pace of recent gains. That s after an analyst swiftly upped his price target on the Strat operator.

Outside the Strat Las Vegas. Operator Golden Entertainment is soaring today. (Image: Pinterest)

In a note to clients today, B. Riley analyst David Bain reiterates a “buy” rating, while upping his price forecast on Golden to $60 from $48. Analysts issuing the same grades on stocks with updated price estimates is an everyday occurrence in financial markets. But it s noteworthy in this case because it was when Bain initiated coverage on the with a $48 projection.

We believe shares are staged to significantly reset higher, with 2023 enterprise value/earnings before interest, taxes, depreciation and amortization (EBITDA) 6.4x versus peers at 10x and a free cash flow (FCF) per share valuation less than half comparables,” said the analyst.

Gaming equities are broadly higher Friday, but Golden is the standout. In midday trading, it s higher by 15.55 percent on volume that s already nearly double the daily average. Bain s new price target implies upside of almost 68 percent from where the casino stock closed on Thursday.

Going with Golden Stock

Las Vegas-based Golden , nine of which are in Southern Nevada, including the Strat. That venue generated record EBITDA in the first quarter.

While the operator has a heavy footprint in its home state, it s not dependent on Strip traffic and trends. Rather, it s more levered to the fast-recovering Las Vegas locals (LVL) segment and favorable demographic trends, such as the influx of retirees from cold-weather states to Nevada, and Californians fleeing high taxes.

For investors, those points are relevant because, as Bain points out, the LVL market accounts for 85 percent of Golden s EBITDA. Even with that significant percentage, the analyst argues the operator s locals exposure is “underappreciated” by the investment community.

“LVL and regional play is benefiting from near-term and long-term drivers, including increasing capacity allowances and the vaccine rollout working a return of a core older demographic,” said Bain.

Golden: More Special

Owing to impressive margin expansion, rising vaccination levels, and pent-up demand, there s no shortage of enthusiasm . However, no two operators are exactly alike, and there are clear reasons, in Bain s view, why Golden is a standout among regional names.

“Even more unique to GDEN is its Nevada offerings acutely match a higher income/wealth migration from California, particularly its millennial-anchored bar and tavern distributed gaming business,” said the B. Riley analyst. “Further, the introduction of the Raiders, new Strip capacity, and strong housing values correlate to make GDEN s portfolio more special than other regional casino companies, in our view.”

Almost $15 currently isn t factored into the Golden stock price, according to Bain. That breakdown comes by way of $10 for potential approval of its Pennsylvania route business and $4.60 for the $1.2 billion worth of unused Las Vegas real estate owned by the company.