Argus: Las Vegas Locals Will Drive Boyd Gaming Higher

Boyd Gaming Corporation BYD is an owner and operator of gaming entertainment properties in multiple states. The company's Las Vegas properties are mostly located away from the tourist Strip area, and this is a good thing, according to Wall Street's newest bull analyst.

The Analyst

Argus Research Company's John Staszak initiated coverage of Boyd Gaming's stock with a Buy rating and $44 price target.

The Thesis

The case for owning casino-themed stocks that aren't located on the tourist Strip in Las Vegas is quite simple, Staszak said in the initiation note. (See the analyst's track record here.) 

Boyd Gaming's market of Las Vegas "locals" will improve from population growth, increased employment and a favorable business environment, Staszak said. The company's two biggest properties, the Gold Coast and the Orleans, were singled out to benefit from higher room rates and an increase in tourist traffic, while the downtown properties will also benefit from higher tourist traffic, the analyst said.

Over the longer term, Boyd's operating margin is likely to increase due to favorable operating leverage at the Las Vegas properties and other regional casinos, Staszak said. 

The analyst's $44 price target implies an EV/EBITDA multiple of 10.9x, which is in the upper half of the stock's historical average range of 7x to 12x — and justified given the strength of the Las Vegas local market and the opportunity for improvements at regional casinos, according to Argus. 

Price Action

Shares of Boyd Gaming were up 2.02 percent at the time of publication Wednesday and are up nearly 85 percent over the past year.

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