Shares of Golden Entertainment, Inc. (NASDAQ:GDEN) were higher by more than six percent on volume that is roughly 30 percent above the daily in midday trading on news that board member Anthony Marnell recently purchased the regional gaming company’s stock.
A new Form 4 filing with the Securities and Exchange Commission (SEC) indicates Marnell purchased nearly 64,100 Golden Entertainment shares yesterday at an average price of $16.85. The stock resides around $18 as of this writing.
These shares were purchased in multiple transactions at prices ranging from $16.42 to $16.96,” according to the SEC document.
Not only did news of Marnell’s buying activity put him immediately in the green on the newly acquired shares, the headlines extended a rally in the gaming company’s stock that has seen it rise 35.11 percent since the start of the current quarter. Underscoring the headwinds encountered by some smaller regional operators this year, Golden Entertainment’s recent bullishness has pushed the stock to a 2019 gain of just six percent.
Golden’s market value of $457.17 million makes it a small-cap stock and one of the tinier publicly traded casino operators in the US.
Directors and executives usually acquire a company’s stock for a single reason: because they expect the shares will appreciate. To that end, this legitimate form of insider buying is viewed by some on Wall Street as an important tell about a company’s potential price action.
In the case of Marnell scooping up shares of Golden Entertainment, that buying activity could be seen as notable due to his extensive gaming industry experience. He developed the M Resort Spa Casino in Las Vegas and currently runs Marnell Gaming, LLC. That company runs the Nugget Casino Resort in Sparks, Nevada.
Marnell has worked in the gaming business for more than two decades, including stops at commercial and tribal operators.
Based on his ownership of almost 39,000 Golden Entertainment shares as of Aug. 16, the director now holds nearly 103,000 shares of the gaming company’s equity, good for the fourth-largest stake among members of the board.
Inside The Golden Entertainment Thesis
Golden Entertainment operates nine gaming properties across Nevada and the Rocky Gap in Maryland. However, the STRAT, formerly the Stratosphere, on the north end of the Las Vegas Strip is the company’s most important venue.
The STRAT, which is currently in the midst of a $140 million renovation, accounts for 25 percent of Golden’s earnings before interest, taxes, depreciation and amortization (EBITDA).
“We believe the property will benefit from major draws including the Convention Center expansion (Jan 2021), Allegiant Stadium (Summer 2020) and MSG Sphere (2021),” said Macquarie hospitality analyst Chad Beynon in a recent note.
The analyst points out that Golden Entertainment was hampered by disappointing earnings last year, high leverage and weak cash flow, but he sees those trends changing for the better.
“Bottom line, as GDEN improves the earnings consistency and balance sheet through fundamental growth, merger synergies and capex returns, we think shares will begin to work,” said Beynon.
He has an “outperform” rating and $25 price target on the stock, implying upside of almost 39 percent from where it currently trades.