Full House Resorts (NASDAQ: FLL) has experienced a 43.43% decline in its stock value over the last year. However, the regional casino company has the potential to provide substantial returns for investors if it successfully manages its flagship casinos in Colorado and Illinois.
In a recent report, David Bain from Texas Capital assigned Full House a “buy” rating along with a price target of $6, indicating the stock has the potential to more than double from its current price of around $2.50. Much of this optimistic viewpoint hinges on the operator successfully managing the full-scale American Place Casino in Waukegan, Illinois.
“A successful financing for the permanent American Place,” Bain commented, highlighting potential risks that could prevent Full House from reaching his predicted price target. “If the company struggles to secure funding for the project, it may not be permitted to operate its temporary facility starting August 2027. Furthermore, if American Place’s earnings before interest, taxes, depreciation, and amortization (EBITDA) fall short of projections, this could hinder the stock from reaching our target.”
Having operated a temporary American Place for the last three years, Full House recently commenced construction on the permanent casino hotel last month. This development could signify progress towards the venue’s ultimate aim, especially after facing numerous legal challenges from a rival tribal entity. The casino will feature an array of attractions, including 900 slot machines, 40 table games, a poker room, and a sportsbook.
American Place: A Catalyst for Growth
American Place plays a vital role in Full House’s long-term strategy for growth. Several years back, CEO Dan Lee mentioned that American Place is expected to surpass the total scale of the operator’s existing portfolio.
Situated conveniently close to Chicago’s O’Hare International Airport and just one hour from Milwaukee, American Place boasts a prime location. This advantageous position is likely a key factor for analysts who see the property as a significant opportunity for enhancing the operator’s EBITDA. Bain predicts that Full House’s EBITDA in 2029 could reach about 200% higher than that of 2024, assuming the permanent American Place opens either in the latter part of 2027 or early 2028.
“The subsequent evaluation of per-share value should increase significantly with successful execution,” notes the Texas Capital analyst.
Interest rates present a variable for Full House’s stock. Bain emphasizes that the operator carries over $450 million in long-term debt, nearly five times its market capitalization, at a rate of 8.25%. This situation suggests that the company would gain from any easing by the Federal Reserve, although it is generally believed that the central bank has limited capacity to cut rates this year.
Consideration of Colorado’s Market
In evaluating the long-term outlook for Full House stock, it’s crucial to include the Chamonix Casino Hotel in Cripple Creek, Colorado in the assessment.
This venue, named after the picturesque French Alps community, opened its doors in late 2023, standing as the most luxurious casino hotel in the Cripple Creek region. A strong investment case for Full House rests on the performance of both American Place and Chamonix as key long-term revenue generators.
“The $250 million investment in Cripple Creek/Chamonix is the largest ever for a casino in that area. If Chamonix fails to meet medium-term expectations, it could impede the stock from reaching our ideal price target,” Bain concludes.