Published on: November 20, 2024, 03:47h.
Last updated on: November 20, 2024, 03:47h.
When looking at the Las Vegas locals gaming market, the year-to-date gross gaming revenue (GGR) has seen a 6% increase. This has led to optimism from analysts for Boyd Gaming (NYSE: BYD) and Red Rock Resorts (NASDAQ: RRR). However, one analyst believes that these forecasts may be overly optimistic.
Deutsche Bank’s Carlo Santarelli has a more cautious view on stocks related to the Las Vegas locals segment. He points out that most of the 6% growth can be attributed to Red Rock’s Durango Casino & Resort in Southwest Las Vegas, opened in December 2023. Excluding this property, Las Vegas locals GGR is actually down 3% in 2024.
Santarelli also mentions that Durango has impacted Red Rock Resort in Summerlin and other casinos, offsetting the positive margin of Durango.
Despite this, Red Rock executives believe that cannibalization will not be a long-term issue. Population growth in the Las Vegas Valley can help mitigate the business lost to Durango, as the operator’s upcoming casino hotels are not in close proximity to Durango.
Boyd Gaming Outlook
Boyd Gaming is another operator with exposure to Las Vegas locals that Santarelli believes is being overly hyped by Wall Street. While some analysts see potential in Boyd’s Las Vegas presence and new projects, Santarelli cautions against assuming a shift to positive revenue growth amid challenges in regional gaming markets.
Considering the market trajectory and challenges faced by regional markets, we do not anticipate a turnaround in same-store growth in 2025,” noted Santarelli.
Santarelli predicts that Boyd’s revenue and cash flow will decline by 1.5% and 3.3%, respectively, next year.
Concerns About Red Rock Estimates
Red Rock, another Las Vegas locals stock, is also viewed optimistically by analysts. However, Santarelli believes that the operator’s cash flow and revenue may see a slight decline next year, despite being rated favorably by analysts.
“Given the insights from management and market dynamics, achieving the projected cash flow growth for 2025 seems challenging,” Santarelli added.
He also points out that Red Rock will need strong growth in cash flow to counter the impact of planned expenses, including Durango’s expansion.