Published on: November 7, 2024, 02:37h.
Last updated on: November 7, 2024, 03:08h.
When most gaming stocks saw gains or remained flat on Thursday, shares of Full House Resorts (NASDAQ: FLL) experienced a decline following weaker-than-expected third-quarter results reported by the regional casino operator on Wednesday. The stock dropped 8% in after-hours trading with double the usual volume.
This suggests that investors may need to exercise patience with Full House shares, as highlighted by B. Riley analyst David Bain in a recent report. However, Bain mentioned that the long-term prospects for Full House remain promising. While reiterating a “buy” rating on the stock, he reduced the price target to $8 from $9. Bain is optimistic about the contributions from American Place casino hotel in Waukegan, Ill., and Chamonix Casino Hotel in Cripple Creek, Colo.
According to the analyst, “FLL’s Illinois (American Place) and Colorado (Chamonix) developments are transformative to earnings before interest, taxes, depreciation, and amortization (EBITDA) generation and valuation. We believe American Place has found its momentum with ongoing marketing improvements for additional benefits.”
Currently, American Place operates in a temporary venue, with the permanent property expected to open in 2027.
Full House’s Strong Presence in Illinois
Waukegan is currently embroiled in a prolonged legal dispute with the Forest County Potawatomi of Wisconsin, a tribal gaming operator that claims the city’s grant of a gaming license to Full House resulted from an unfair bidding process.
Despite acknowledging that the legal case has caused delays and uncertainty around the American Place project, Full House highlighted strong third-quarter results at The Temporary at American Place. Bain noted that the success of the newly established Hard Rock casino in Rockford, Ill., could bode well for the Full House property.
“The permanent facility of Hard Rock Casino Rockford went live in late August, and in September, gross gaming revenue saw a 140% month-over-month increase. While not an estimate for American Place’s permanent site, we believe it showcases the potential of earnings power compared to the project’s traditional investor expectations,” Bain pointed out.
Although Waukegan is not in direct competition with the Hard Rock venue in Rockford, which is about a two-hour drive away, American Place is an hour away from Chicago, hence positioning it for long-term success.
Colorado Journey Uncertain, but Progress In Sight
The Chamonix Casino Hotel in Cripple Creek, Colo., opened in December, and the EBITDA ramp at the venue has been inconsistent in its first year. Nevertheless, the venue remains crucial to Full House’s long-term investment plan. Chamonix holds the potential to become one of the most luxurious and highly rated casino resorts in Colorado, with amenities to support such achievements.
Bain highlighted that EBITDA fluctuations are expected to stabilize over time, emphasizing that Chamonix fills a void in the Cripple Creek market.
“Although the initial EBITDA ramp at Chamonix may be uneven, we believe it addresses a gaming win disproportionalty in Cripple Creek compared to other Colorado gaming markets. We remain confident in this thesis and our long-term outlook for EBITDA generation of $45M+ from Chamonix upon maturity,” he concluded.