Despite the ongoing construction disruptions at its Las Vegas properties, Red Rock Resorts (NASDAQ: RRR) has seen a 10% decline in its stock performance this year. However, some notable investors still hold a bullish outlook on the company.
Among them is Ron Baron, the founder of Baron Capital. In a recent commentary to investors of the Baron First Principles ETF (NYSE: RONB), Baron praised Red Rock for its solid balance sheet and expressed optimism about its long-term potential.
“The company’s balance sheet remains strong with increased liquidity for further capital investment and shareholder returns,” stated Baron. “We believe the stock remains attractive compared to what we believe the business can become in time.”
Red Rock stock makes up 2.61% of the RONB portfolio, positioning it as the tenth-largest holding in the ETF. With $489.62 million in assets under management, the fund was launched in December last year.
Red Rock Stock Resilience During Construction Disruptions
This year, Red Rock has faced financial setbacks due to construction disturbances at the Durango Casino & Resort, Green Valley Ranch, and Sunset Station in Las Vegas. However, the prevailing consensus among experts is that the current disruptions will pave the way for long-term benefits as the company enhances its casino properties.
Baron noted that in the second quarter, the construction disruptions subsided, allowing investors to focus on the future benefits of Red Rock’s recent investments in its resorts. This positive outlook is expected to lead to higher earnings, improved cash flow, and continued property investments and shareholder returns.
While Red Rock is the sole gaming stock in RONB, another Baron ETF holds shares of Wynn Resorts (NASDAQ: WYNN).
Sell-Side Analysts Favor Red Rock Stock
Red Rock has also garnered favor among sell-side analysts, particularly due to its emphasis on the thriving Las Vegas locals market. For instance, analyst David Bain of Texas Capital recently initiated coverage on the stock with a “buy” rating and a $72 price target, suggesting potential growth of nearly 33%.
Bain highlighted Red Rock’s success in capturing the locals market in Las Vegas and its strategic investments in the properties, resulting in strong returns. Additionally, the operator’s significant real estate holdings are seen as a positive catalyst for the stock.
With a history of generating high returns on greenfield projects and a large Nevada land bank, Red Rock is positioned for long-term growth. Bain anticipates a project announcement by the first half of 2027, which could further boost the stock.