Posted on: March 18, 2024, 11:46h.
Last updated on: March 18, 2024, 11:46h.
Shares of Golden Entertainment (NASDAQ: GDEN) are off 15.15% year-to-date and the stock labors 25% below its 52-week high, but some analysts remain bullish on the name.
That group includes Truist Securities analyst Barry Jonas who in a recent report to client, initiated coverage of the Strat operator with a “buy” rating and a $45 price target. That implies upside of about 32% from the March 15 close. Jonas believes Golden is underappreciated and undervalued.
(Current valuation) doesn’t reflect improving fundamentals, a significant reduction in leverage, or a real estate ownership backstop,” wrote the analyst.
In anointing Golden Entertainment the “Silver State Warriors,” Jonas added that the casino operator has one of the best balance sheets in the industry and that returning capital to shareholders could be an increasing priority for the gaming company.
Golden Entertainment Now Nevada Pure Play
Following its $260 million sale of the Rocky Gap Casino Resort in Flintstone, Md. and the divesture of slot route unit last year, Golden is now a pure play on Nevada with nearly 70 PT’s Pubs and casinos in Las Vegas, Laughlin, and Pahrump.
In addition to the Strat, Golden’s other Sin City casinos are Arizona Charlie’s Boulder, and Arizona Charlie’s Decatur. Coupled with PT’s Pubs, that’s enough to tether Golden to the rising prominence of the Las Vegas locals demographic, which is boosted in large part by the Valley’s soaring population.
In Pahrump, which is located about 58 miles from the Las Vegas Strip, Golden owns and operates the Gold Town Casino, Lakeside Hotel & Casino, and Pahrump Nugget Hotel & Casino. Golden operates the Aquarius and Edgewater gaming venues in Laughlin. That puts it in competition with Caesars Entertainment (NASDAQ:CZR) as the dominant casino name in that city.
Golden could also be mulling options for the Colorado Belle in that city, which has been shuttered since 2020 due to the coronavirus pandemic.
Golden Entertainment Real Estate Story not Fully Appreciated
Truist’s Jonas argued that investors ascribe some credit for Golden’s Las Vegas real estate holdings, adding that the stock’s current multiples imply a shareholder is getting the company’s Sin City casino operations for free. However, there isn’t much adulation for the entirety of the operators property holdngs.
“Additionally, we think GDEN’s real estate could be worth as much as the entirety of its current equity value, with the OpCo essentially free,” observed Jonas.
Wall Street has long praised gaming companies with extensive or full control of their real estate and it’s not a stretch to assume Golden’s Nevada real estate is worth close to or more than its market capitalization of $977.05 million.
Jonas also sees Golden as a capital return story — a thesis that was cemented earlier this month when the company initiated a quarterly dividend. The Arizona Charlie’s operator has also been a devoted buyer of its own shares and is actively reducing debt.
