Future Developments Like Cadence Crossing Casino Will Tap Into Underserved Markets

Key Takeaways

• Boyd Gaming's property enhancements and strategic developments aim to boost customer experience and diversify revenue streams with long-term growth potential.
  
• Expansions and new projects like Sky River Casino and Cadence Crossing position Boyd for enhanced performance and sustained earnings growth.
  
• Competitive pressures and economic uncertainties pose risks to Boyd Gaming's revenue growth and profitability, with concerns about capital investment returns and online revenue volatility.

Catalysts

Operates as a multi-jurisdictional gaming company in the United States and Canada.

• Boyd Gaming is enhancing properties, including renovations and new amenities at locations like Suncoast and Orleans, aiming to boost customer experience and drive revenue growth.
  
• The Cadence Crossing Casino development, set to open in 2026, intends to capitalize on the growth of the Cadence community, potentially increasing Boyd's revenue stream.
  
• The expansion at Sky River Casino, including new slots, parking, and future amenities, is set to position the property for enhanced performance, impacting future earnings positively.
  
• Future developments such as the Norfolk resort, expected to complete in 2027, aim to leverage underserved markets, diversifying the portfolio and driving long-term revenue growth.
  
• With strategic projects like Treasure Chest performing ahead of expectations and ongoing growth investments, Boyd is poised to potentially enhance margins and sustain earnings growth.

Boyd Gaming Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Boyd Gaming's revenue will grow by 1.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 14.7% today to 14.4% in 3 years time.
• Analysts expect earnings to reach $596.6 million (and earnings per share of $7.14) by about April 2028, up from $578.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.8x on those 2028 earnings, up from 9.3x today. This future PE is lower than the current PE for the US Hospitality industry at 22.4x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.44%, as per the Simply Wall St company report.

Boyd Gaming Future Earnings Per Share Growth

Risks

• Continued competitive pressures in the Las Vegas Locals market, despite current outperformance, could impact future revenue growth if competitors escalate promotional activities or new entrants emerge.
  
• The Midwest and South segment has been challenged by weather disruptions and a cautious outlook due to broader economic issues, which could stabilize or slightly affect revenue rather than provide significant growth.
  
• The online segment faces potential revenue volatility due to unpredictable factors such as poor NFL hold periods, and significant growth largely depends on state legislation for iGaming expansion.
  
• Capital investments in growth projects are substantial, with a total projected CapEx for 2025 of $600 million to $650 million, suggesting potential strain on cash flows and leverage, which could affect profitability if returns do not meet expectations.
  
• Uncertainties around the economic environment outside of Las Vegas, where retail customer spending has remained flat or declining, could impact overall revenue and margins if the trend does not improve.

Valuation

• The analysts have a consensus price target of $81.667 for Boyd Gaming 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 $93.0, and the most bearish reporting a price target of just $72.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.2 billion, earnings will come to $596.6 million, and it would be trading on a PE ratio of 11.8x, assuming you use a discount rate of 9.4%.
• Given the current share price of $64.82, the analyst price target of $81.67 is 20.6% 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.