Marquee Projects And Tribal Gaming Will Drive Long-Term Rental Stability

Key Takeaways

• Diversification into tribal markets and upgrades of key properties are expected to boost rental revenues and ensure long-term income stability.
  
• Demographic shifts and trends in entertainment spending, including legalized sports betting, underpin resilient occupancy, tenant health, and predictable, inflation-protected income.
  
• High tenant concentration, project risks, increased credit losses, digital competition, and limited diversification threaten GLPI's revenue stability, growth prospects, and long-term earnings quality.

Catalysts

GLPI is engaged in the business of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements, pursuant to which the tenant is responsible for all facility maintenance, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

• The ongoing development and deployment of significant investment capital into marquee projects-such as the Chicago Bally's, The Belle conversion, and continued land-based upgrades-should meaningfully boost long-term rental revenue streams and underlying tenant health, ultimately driving steady funds from operations and net income growth.
  
• Expanding into tribal gaming real estate, where the company is in advanced discussions with multiple tribal operators, could provide Gaming and Leisure Properties with access to an underserved and growing market, diversifying the tenant base and supporting sustained rental and revenue growth.
  
• The aging U.S. population with increasing disposable income is likely to increase regional visitation and casino spending, underpinning stable occupancy for the company's properties and bolstering predictable, inflation-protected rental income, which should support resilient margins and revenue visibility.
  
• The persistent shift in consumer preference toward experiences (travel, hospitality, and entertainment) over physical goods provides a long-term tailwind to casino and leisure visitation, strengthening tenant performance, rent coverage, and minimizing lease default risk-thereby enhancing the company's earnings stability.
  
• The growing acceptance and legalization of sports betting and online gaming is poised to elevate tenant revenues and foot traffic, improving rent coverage ratios for Gaming and Leisure Properties, and increasing the company's ability to negotiate favorable lease escalators, supporting future revenue and AFFO growth.

Gaming and Leisure Properties Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gaming and Leisure Properties's revenue will grow by 8.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 45.9% today to 52.5% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $3.25) by about August 2028, up from $717.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $557.4 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.3x on those 2028 earnings, up from 18.2x today. This future PE is lower than the current PE for the US Specialized REITs industry at 28.3x.
• Analysts expect the number of shares outstanding to grow by 3.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.69%, as per the Simply Wall St company report.

Gaming and Leisure Properties Future Earnings Per Share Growth

Risks

• Significant financial exposure to Bally's, a tenant with a downgraded credit profile and ongoing cash flow and leverage concerns, raises tenant concentration risk that could negatively impact GLPI's revenue predictability, rent collections, and ultimately net margins if Bally's financial situation deteriorates.
  
• The majority of upcoming capital deployment ($338 million) is committed to development projects with Bally's Chicago and other assets without parent guarantees, increasing project-specific risk, exposure to construction cost inflation, and uncertainty regarding lease revenue and asset returns.
  
• Provision for credit losses has increased materially due to an increasingly pessimistic economic outlook and declining commercial real estate indices, signalling elevated credit risk and potential pressure on property values and earnings if macroeconomic conditions worsen further.
  
• Expanding digital and online gaming options (e.g., iGaming, online sports betting) are recognized as impacting physical casino growth, with potential longer-term structural shifts in consumer preferences possibly slowing demand for brick-and-mortar casino properties and challenging future rental income growth.
  
• Limited progress on diversifying beyond traditional gaming assets and geographic concentration in certain markets restricts GLPI's organic growth potential, increases sensitivity to local regulatory changes or market saturation, and could constrain long-term revenue and FFO growth.

Valuation

• The analysts have a consensus price target of $54.148 for Gaming and Leisure Properties 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 $60.0, and the most bearish reporting a price target of just $46.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.0 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 20.3x, assuming you use a discount rate of 7.7%.
• Given the current share price of $46.25, the analyst price target of $54.15 is 14.6% 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.