Barclays Has 4 Reasons To Upgrade Boyd Gaming

Boyd Gaming Corporation BYD has gotten off to a slow start to 2018, but one Wall Street analyst says the pullback is an excellent buying opportunity.

The Analyst

Barclays analyst Felicia Hendrix upgraded Boyd from Equal Weight to Overweight and raised her price target from $33 to $40.

The Thesis

After Boyd booked an incredible 78 percent gain in 2017, the stock declined roughly 5 percent in the first four months of 2018 as the M&A environment in the gaming industry cooled a bit. Hendrix says there are still plenty of bullish catalysts for Boyd, and its business is well-positioned to continue to outperform.

In the note, Hendrix mentioned four major tailwinds for Boyd in 2018:

• A string U.S. consumer, particularly in Las Vegas.
• Profitability enhancement initiatives, including amenity investments and marketing adjustments.
• Debt reduction.
• Accelerating free cash flow.

Barclays projects Boyd will grow free cash flow by 12 percent in 2019 and 10 percent in 2020. In addition, Boyd is expecting to close five different property acquisition deals in the second half of the year.

“Trading at 9.6x 2019E EBITDA, BYD is well above the valuation range we have traditionally applied to regional gaming companies,” Hendrix said.

She said if Boyd is able to successfully increase its EBITDA margins by 2.5 to 3 percent by 2019, there could be 10 percent upside to Barclay’s $40 target.

Price Action

Boyd's stock traded higher by 1 percent to $52.96 on Tuesday.

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