Date: October 9, 2024, 03:24h.
Last updated on: October 9, 2024, 03:24h.
Red Rock Resorts (NASDAQ: RRR) has seen a decline in its shares, dropping nearly 10% in the last 90 days. This could be due to the seasonal impact of being a presidential election year in 2024.
According to a report by Deutsche Bank analyst Carlo Santarelli, in previous presidential election years, Red Rock’s gaming revenue in the fourth quarter decreased by 1%, while in non-presidential years, the revenue grew by an average of 0.8%. Santarelli also mentioned the potential benefits to Red Rock from the proposed “no tax on tips” policy.
Anecdotally, we believe the ‘no tax on tips’ policy, should it ultimately become reality, would help [Red Rock] both from a revenue perspective, given the incremental discretionary spend potential of gaming customers in Las Vegas and the exposure to the service industry,” noted Santarelli.
The analyst suggested that the implementation of this policy could save Red Rock up to $3 million annually in payroll costs.
Exploring Red Rock Expansion Plans
Santarelli anticipates adjustments in Red Rock’s expansion plans in the Las Vegas Valley, particularly focusing on the development of the new Cactus Lane casino hotel, as well as expansions at the Durango Casino & Resort and the planned casino hotel in the Inspirada community.
The analyst believes that the priorities for 2025 include developments near the South Point and Southwest Las Vegas areas, based on population growth and previous experiences.
Red Rock may benefit from the Federal Reserve’s recent interest rate cuts, making it more favorable to add new venues and enhance existing properties.
Long-Term Catalysts for Red Rock
Despite the recent lag in Red Rock’s stock performance, Santarelli highlighted long-term catalysts such as the company’s entry into the Las Vegas gaming tavern market, attractive demographics, and valuation.
The analyst also mentioned the potential revenue from Red Rock’s management agreement for a tribal casino in Central California, estimated to generate $40 million to $50 million annually upon completion in 2026.