Jacob Wolinsky
ValueWalk
Boyd Gaming stock got a big upgrade from a Wall Street analyst.
The stock has been moving higher in recent days.
Is Boyd Gaming stock a buy?
Boyd Gaming (NYSE:B YD) stock has been surging as of late, rising nearly 4% since last week following a significant upgrade from a major Wall Street analyst.
The casino and gaming stock received a buy rating from Jefferies, upgraded from hold, and a massive price target increase.
Jefferies boosted the price target from $73 to $92 per share. From its current share price of $74 per share, that would represent a 24% increase over the next 12 months.
Should investors put this casino stock on their radar?
Boyd Gaming is a casino operator that owns 28 casinos in 10 states. Most of them are in Las Vegas, including the Fremont Hotel and Casino, Aliante Casino and Hotel, Gold Coast Hotel and Casino, and Main Street Station Casino Brewery Hotel, to name a few.
But it also owns cassino hotels in Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. Further, Boyd has its own online sports betting app and is a 5% owner of FanDuel.
Jefferies analyst David Katz cited several catalysts for Boyd, reported Nasdaq. The catalysts include its capital investment pipeline at its regional properties, and an improved outlook in Vegas, coming off a highly competitive 2024 that should see easing comps in 2025.
“We strengthened our growth pipeline, securing an opportunity to develop a best-in-market casino resort in Norfolk, Virginia, while continuing work on property enhancements nationwide,” president and CEO Keith Smith said in the third quarter earnings report.
Katz also sees value for Boyd in its FanDuel ownership stake, which he called underappreciated. Online gambling revenue for Boyd grew 56% in the quarter to $141.3 million, making it the fastest growing segment.
“The largest contributor to our online results is our partnership with FanDuel, which continues to strengthen its position as the nation’s leading sports-betting company,” Smith said on the Q3 earnings call. “Beyond the revenue and EBITDAR growth we are seeing from our market access agreements with FanDuel, we also continue to benefit from FanDuel’s success through a 5% equity interest.”
The online performance led Boyd to raise its full year revenue guidance for the segment.
Further, Boyd stock should get a boost from its announcement in December that it will repurchase an additional $500 million in company stock. That is in addition to the $843 million remaining from a previous stock repurchase authorization.
Buying back those shares should contribute to Boyd’s earnings growth, which Jefferies estimates at 9%, year over year.
It also signals the company’s improving financials, as Smith alluded to on the Q3 earnings call.
“Our improved performance has allowed us to return nearly $1.7 billion to our shareholders over the last three years,” Smith said on the call. “At the same time, we are actively investing in our properties to enhance the competitive positioning of our portfolio nationwide.”
Jefferies price target upgrade aside, Boyd Gaming has a median price target among the 17 analysts that cover it of $75.50. That would represent just 2% upside for the stock. However, that could shift over the coming weeks, leading up to and after Boyd’s fourth quarter earnings are released on February 6. Almost half the analysts consider Boyd stock a buy, while the rest consider it a hold.
The stock is relatively cheap, with a trailing price-to-earnings (P/E) ratio of 13 and a forward P/E of 10. With its reasonable valuation, improving financials, and solid growth expectations, Boyd stock looks like a decent option. However, investors may want to wait for the Q4 earnings report in early February for more visibility.
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