Boyd Gaming Corp Downgraded to Hold Amid Inflationary Pressures
Analysts downgrade Boyd Gaming Corp rating to Hold from Buy
Analyst firm Argus has downgraded Boyd Gaming Corporation (BYD) to a Hold rating from Buy, citing inflationary pressures, debt, and casino competition as potential headwinds. Despite an expected mid-single-digit increase in revenue for 2024, earnings are projected to grow modestly. Analyst John Staszak has raised concerns over the Las Vegas Locals segment due to the opening of new competitors. However, growth is expected in the Downtown Las Vegas and online segments. Offset by higher operating expenses and renovation costs, earnings benefits from revenue growth and share buyback programs may be constrained. Argus believes that Boyd's operating margin will increase in the long term due to favorable operating leverage at Las Vegas properties and regional casinos. Currently, BYD's valuation is at 8.7x the revised 2024 EPS estimate. BYD's shares fell 2.00% in premarket trading to $52.44.
Key Takeaways
- Boyd Gaming Corporation (BYD) downgraded to Hold from Buy by Argus due to inflation, debt, and competition.
- Mid-single-digit revenue increase expected in 2024, but earnings growth will be modest.
- Las Vegas Locals segment may face pressure from a competitor's opening, while Downtown Las Vegas and online segments are poised for growth.
- Higher operating expenses and renovation costs may offset revenue growth and share buyback benefits.
- BYD's valuation reflective of earnings prospects for the near term.
- Anticipated long-term operating margin increase due to favorable leverage at Las Vegas properties and regional casinos.
Analysis
The downgrade of Boyd Gaming Corporation (BYD) by Argus reflects concerns over inflation, debt, and competition, impacting investors seeking short-term returns. Inflation and debt may pose profitability challenges, while competition, especially in the Las Vegas Locals segment, could further affect earnings. Higher operating expenses and renovation costs may offset revenue growth and share buyback benefits. However, the Downtown Las Vegas and online segments are expected to grow. Countries and organizations exposed to BYD's performance, such as suppliers, competitors, and financial institutions, may also be affected, potentially impacting the gaming and hospitality industry.
In the long term, BYD's operating margin might increase due to favorable leverage at Las Vegas properties and regional casinos. Nevertheless, potential investors should consider the current challenges faced by the company.
Did You Know?
- Operating Margin: This signifies the percentage of a company's revenue left over after subtracting the cost of goods sold (COGS) and operating expenses, indicating efficiency and profitability.
- Earnings Per Share (EPS): This measure of a company's profitability is calculated by dividing the net income by the number of outstanding shares of stock, often used to determine stock value.
- Operating Leverage: This refers to the extent to which a company's fixed costs are spread out over a larger number of units of output, contributing to higher profits if a large volume of goods or services can be sold.