Golden Entertainment Seen as Golden Opportunity Among Casino Stocks
Golden Entertainment (NASDAQ: GDEN) stock is 25% below its 52-week high and has lost 15.15% of its value so far this year. Still, a few analysts are optimistic about the name.
Among them is analyst Barry Jonas of Truist Securities, who began covering the Strat operator with a "buy" rating and a price target of $45 in a recent note to clients. That suggests a gain of almost 32% from the closing on March 15. Jonas thinks Golden is underrated and underappreciated.
"(Current valuation) doesn’t reflect improving fundamentals, a significant reduction in leverage, or a real estate ownership backstop,” he wrote.
Jonas declared Golden Entertainment the "Silver State Warriors," pointing out that the casino operator has one of the greatest balance sheets in the sector and that the gaming company may prioritize paying back shareholders' capital more and more.
Golden Entertainment is now a pure play in Nevada
Golden is now a pure play on Nevada after selling the Rocky Gap Casino Resort in Flintstone, Maryland for $260 million and selling its slot route unit the previous year. It has casinos in Laughlin, Pahrump, and Las Vegas that total around seventy PT's Pubs.
Arizona Charlie's Boulder and Arizona Charlie's Decatur are two other casinos in Sin City owned by Golden, in addition to the Strat.
When combined with PT's Pubs, that's sufficient to link Golden to the growing significance of the Las Vegas locals demographic, which is mostly driven by the Valley's rapidly expanding population.
Golden owns and runs the Pahrump Nugget Hotel & Casino, Lakeside Hotel & Casino, and Gold Town Casino in Pahrump, which is roughly 58 miles from the Las Vegas Strip. The Aquarius and Edgewater casino establishments in Laughlin are run by Golden. It now faces competition from Caesars Entertainment (NASDAQ: CZR) for the title of most recognizable casino in that particular city.
The Colorado Belle in that city, which has been closed since 2020 because to the coronavirus pandemic, may also be under consideration by Golden.
Golden Entertainment's Tale of Real Estate
Investors give Golden's real estate holdings in Las Vegas some credit, according to Truist's Jonas, who also said that the stock's current multiples suggest that a shareholder is receiving the company's Sin City casino operations for free. Still, not much praise is given to the operator's total property holdings.
“Additionally, we think GDEN’s real estate could be worth as much as the entirety of its current equity value, with the OpCo essentially free,” observed Jonas.
Given that Wall Street has historically complimented gaming businesses who own all or nearly all of their real estate, it is reasonable to believe that Golden's Nevada real estate is valued at least as much as its $977.05 million market capitalization.
In addition, Jonas views Golden as a story of capital returns, a view strengthened earlier this month when the business started paying out a quarterly dividend. Along with being a committed shareholder, the operator of Arizona Charlie's is diligently paying down debt.
