Publish Date: May 25, 2026, 04:16h.
Updated on: May 25, 2026, 04:16h.
- Research firm asserts no knowledge of Churchill Downs engaging in consolidation discussions
- Clear rationale for the operator to contemplate spinning off or divesting its slower-growing gaming division
- Primary focus is on an “outright sale”
Churchill Downs (NASDAQ: CHDN) has experienced a 6% drop in shares over the past month, indicating that the anticipated post-Kentucky Derby bounce did not occur. However, the gaming company possesses various strategies to enhance shareholder value.
In a recent analysis for clients, Stifel analyst Jeffrey Stantial discusses the potential flexibility concerning Churchill Downs’ gaming division, while clarifying that the firm lacks any information about the company considering a merger or acquisition.
Stantial highlights a compelling sum-of-the-parts (SOTP) rationale for divesting or spinning off CHDN’s slower growth/gaming segment via valuation analysis and historical comparables. He rates the stock as a “buy” with a price target of $139, indicating substantial upside from last Friday’s close at $85.12.
The company operates 13 venues across 11 states, including regional casinos. Its properties include Calder Casino in Miami Gardens, Florida; del Lago Resort & Casino in Waterloo, New York; Fair Grounds Race Course in New Orleans, Louisiana; Hard Rock Hotel & Casino in Sioux City, Iowa; Harlow’s Casino Resort & Spa in Greenville, Mississippi; Miami Valley Gaming in Lebanon, Ohio; Ocean Downs Casino in Berlin, Maryland; Oxford Casino Hotel in Oxford, Maine; Presque Isle Downs & Casino in Erie, Pennsylvania; Rivers Casino in Des Plaines, Illinois; Riverwalk Casino Hotel in Vicksburg, Mississippi; and Terre Haute Casino Resort in Terre Haute, Indiana.
Potential Outcomes for Churchill Downs’ Gaming Segment
It’s important to note that there have been no public indications from Churchill Downs suggesting the company is considering a transaction regarding its gaming division. Stantial acknowledges that there is some resistance to this idea within the investment community.
This includes concerns that Churchill Downs’ gaming division may offer limited cost efficiencies to potential buyers, along with the belief that the pool of publicly traded interested parties is small. However, Stantial notes that this perspective fails to consider broader financial buyers and possible revenue synergies, multiple arbitrage, and strategic diversification benefits.
Stantial also mentions that a common argument against the notion of Churchill Downs divesting its gaming division is that Boyd Gaming (NYSE: BYD) could be the only suitable buyer, though there is no confirmation of any ongoing discussions regarding that possibility.
If Churchill Downs contemplates divesting its gaming segment, it is more likely to pursue an outright sale rather than a spin-off. This is significant since a spin-off would be more tax advantageous.
Churchill Downs: Exploring Opportunities
Churchill Downs is not under pressure to make immediate decisions but divesting slower-growth divisions could empower the operator to raise capital for investment in higher-margin assets, including Exacta, the historical racing machines, TwinSpires, and of course, the Kentucky Derby.
The operator does not necessarily need to sell its gaming division entirely to unlock shareholder value in that area. There are alternative strategies available.
“While discussions with investors have mainly centered around a potential outright sale, we see wider options to realize value through corporate actions related to Gaming, including select asset sales, real estate monetization, OpCo monetization, tax-deferred spin-offs, or divestitures with continuing involvement through management fees,” concludes Stantial.