CHDN: Regional Casinos Will Drive Future Upside Despite Dumfries And Virginia Risks

Analysts have nudged their price target for Churchill Downs slightly lower, trimming it by about $1 to reflect a modestly higher discount rate and near term headwinds around slower property ramps and softer regional casino trends, even as they continue to view the shares as attractively valued.

Analyst Commentary

Analysts remain constructive on Churchill Downs despite trimming price targets, citing a combination of company specific execution challenges and broader softness in regional gaming trends. The modestly lower targets still imply meaningful upside from current levels, reflecting confidence in the company’s long term growth algorithm and cash flow generation.

Bullish Takeaways

Bullish analysts continue to see the stock as inexpensive at current levels, indicating that the recent pullback more than discounts near term operational and macro headwinds.
Revisions to price targets have been incremental rather than structural, suggesting that long term earnings power and the core growth thesis remain largely intact.
The diversified gaming and racing portfolio, including properties around key metropolitan areas, is viewed as a durable platform for steady cash flow and potential valuation re rating as ramps normalize.
Major firms such as JPMorgan maintain positive ratings, framing the target cuts as part of a sector wide recalibration ahead of earnings rather than a company specific downgrade in execution expectations.

Bearish Takeaways

Bearish analysts are increasingly cautious on the slower than expected ramp at the Dumfries property near Washington DC, flagging risk to near term return on invested capital and earnings visibility.
Regulatory uncertainty in Virginia, including inconsistent enforcement actions against illegal machines, is seen as an overhang that could weigh on both growth execution and investor sentiment.
Softening regional casino trends in September, following a stronger summer, raise concerns that consumer pressure and macro volatility could limit upside to near term estimates.
The modest upward adjustment in discount rates embedded in valuation models underscores a higher risk premium for the sector, which may cap multiple expansion even if fundamentals stabilize.

What's in the News

Churchill Downs and Kambi Group extended their long standing sports betting partnership, with Kambi to continue powering 15 retail sportsbooks across eight states and support an expansion into Maine in December 2025 (company announcement).
The company unveiled Victory Run, a $280 million to $300 million premium hospitality project at Churchill Downs Racetrack that will add higher value seating and suites between the First Turn Club and Skye Terrace by the 2028 Kentucky Derby (company announcement).
Churchill Downs faces a class action lawsuit in New York alleging collusion in computer assisted wagering that purportedly advantages inside bettors and harms everyday customers (lawsuit filing).
The board approved a 7 percent increase in the annual cash dividend to $0.438 per share, payable in January 2026 to shareholders of record as of December 5, 2025 (company announcement).
Churchill Downs continued to return capital to shareholders through share repurchases, buying back over 515,000 shares between July and September 2025 under existing authorization programs (company disclosure).

Valuation Changes

Fair Value Estimate has fallen slightly, edging down from about $135.17 to $134.75 per share, reflecting modestly higher risk assumptions and near term headwinds.
Discount Rate has risen slightly, increasing from approximately 10.05 percent to 10.14 percent, which places a higher hurdle on future cash flows and modestly lowers the valuation.
Revenue Growth is essentially unchanged at roughly 3.01 percent, indicating a largely stable outlook for top line expansion.
Net Profit Margin is essentially unchanged at about 18.71 percent, implying stable profitability expectations.
Future P/E has slipped slightly, decreasing from about 18.02x to 18.01x, consistent with a modestly higher discount rate and largely unchanged growth and margin assumptions.

Strategic investment in premium Derby offerings, media partnerships, and digital expansion will boost revenue quality, national reach, and brand sponsorship appeal.
Growth in experiential gaming venues and mobile wagering will drive recurring revenue, customer diversity, and sustained margin improvement.
Heavy reliance on horse racing and HRM venues, combined with shifting consumer trends, rising costs, and regulatory risks, threatens long-term growth and earnings stability.

Catalysts

About Churchill Downs

Operates live and historical racing entertainment venues, online wagering businesses, and regional casino gaming properties in the United States.What are the underlying business or industry changes driving this perspective?

Strategic reinvestment in premium Kentucky Derby experiences and selective venue upgrades-particularly expanding Derby Week with new hospitality offerings, international marketing, prime-time Oaks coverage, and enhanced digital content-should drive substantial step-function revenue growth, higher per-attendee pricing, and stronger sponsorship income in 2026 and subsequent years, supporting higher adjusted EBITDA and net margins.
Expansion and ramp-up of high-margin Historical Racing Machine (HRM) properties in Kentucky and Virginia, along with new projects in New Hampshire and potential new markets, will increase Churchill Downs' exposure to experiential gaming and drive recurring revenue and margin growth, as consumer preferences continue shifting toward destination entertainment and integrated gaming.
Renewed and expanded long-term media rights agreements (e.g., the new seven-year NBC contract and first-time prime-time Kentucky Oaks broadcast) provide multi-year, inflation-hedged visibility on media revenue streams, while increasing the company's national reach, cultural relevance, and attractiveness to sponsors-bolstering overall revenue resilience and free cash flow.
Accelerating digital transformation and growth in mobile wagering through the TwinSpires platform-evidenced by record new registrations and active users, and enhanced partnerships with FanDuel and DraftKings-positions Churchill Downs to capture a broader, younger, and more diverse customer base, sustaining long-term wagering and transaction frequency growth.
Optimized capital allocation, including disciplined project investments, share repurchases, and free cash flow enhancement from favorable tax changes (100% bonus depreciation, enhanced interest deductibility), will improve long-term earnings per share and support upside to current valuations as free cash flow per share rises.

Churchill Downs Earnings and Revenue Growth

Churchill Downs Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Churchill Downs's revenue will grow by 4.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 15.2% today to 16.9% in 3 years time.
Analysts expect earnings to reach $541.1 million (and earnings per share of $7.24) by about September 2028, up from $429.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $609.2 million in earnings, and the most bearish expecting $454 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.6x on those 2028 earnings, up from 15.9x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
Analysts expect the number of shares outstanding to decline by 4.59% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.55%, as per the Simply Wall St company report.

Churchill Downs Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Churchill Downs remains highly concentrated in horse racing and historical racing machine (HRM) venues, which leaves the company exposed to event-specific risks such as adverse weather, regulatory changes, or declining interest in these forms of gambling-potentially causing revenue volatility and challenging long-term earnings stability.
Sustained high levels of capital expenditure for renovations, new venues (e.g., The Rose, Salem casino), and premium experiences at Churchill Downs Racetrack may compress net margins and constrain free cash flow if returns on these investments do not materialize as expected, especially as competition increases and the market matures.
Demographic shifts and evolving consumer preferences toward digital entertainment and away from traditional horse racing could dampen long-term demand for the company's core product, leading to stagnating attendance, reduced wagering, and weaker sponsorship revenue-ultimately pressuring future growth and revenue expansion.
Intensifying competition from both regional gaming venues and digital/mobile betting operators may limit Churchill Downs' ability to differentiate its offerings, making it more difficult to expand or sustain market share in crowded and highly regulated markets, risking pressure on revenue growth and operating margins.
The company's ongoing expansion into new markets such as Virginia and New Hampshire increases exposure to potential regulatory changes and tax rate adjustments, which, combined with rising labor and compliance costs in the gaming and hospitality sectors, could erode profit margins and hinder anticipated earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $137.455 for Churchill Downs based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $155.0, and the most bearish reporting a price target of just $125.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.2 billion, earnings will come to $541.1 million, and it would be trading on a PE ratio of 20.6x, assuming you use a discount rate of 10.5%.
Given the current share price of $97.69, the analyst price target of $137.45 is 28.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Derby Experiences And Mobile Wagering Will Ignite Future Markets