Investors on Wall Street continue to hold a strong affinity for Churchill Downs stock.
Posted on: February 22, 2024, 06:11h.
Last updated on: February 22, 2024, 06:11h.
Churchill Downs (NASDAQ: CHDN) saw a small increase in shares today following the release of strong fourth-quarter earnings on Wednesday. As attention shifts to the company’s new properties, analysts are evaluating their potential impact on the stock price.
Horses in a race finish at Ellis Park. A financial expert maintains a positive outlook on the stock of Churchill Downs. (Picture: Ellis Park)
Some locations, such as The Rose Gaming Resort in Dumfries, VA, have been given the green light to begin phase one of their project. In addition, Churchill Downs plans to open Owensboro Racing & Gaming in Owensboro, KY by early 2025. This site will act as an extension of Ellis Park Racing and Gaming and generate funds for horse race prizes at the track.
Despite ongoing worries about the state of the domestic horseracing industry, Churchill Downs continues to benefit from live and historical racing (L&H).
In a report to clients, Stifel analyst Jeffrey Stantial stated that management noted strong performance across the Life and Health sector, with almost all property revenues surpassing their expectations. Based on their observations, this is likely due to underestimated favorable weather comparisons in December, as well as a significant boost from the closure of skill-based games in mid-November and continued growth at key properties in Kentucky.
According to his evaluation, the Churchill Downs stock should be considered a “buy” and he has set a target price of $150.
Investors on Wall Street continue to favor Churchill Downs stock.
Experts are optimistic about Churchill Downs, even though the company does not have a presence in Las Vegas and is not a significant competitor in the online sports betting industry.
Catalysts include an extensive pipeline of high return on investment projects, benefits from the Exacta and P2E acquisitions, and the emerging growth story tied to historical horse racing (HHR) machines. Eight of the 10 analysts covering the stock rate it a “strong buy” or “buy” and the consensus price target of $143 implies 19.31% upside from today’s close.
One of the reasons why Churchill Downs is a top gaming choice on Wall Street is due to the growth of its TwinSpires division and strategic acquisitions.
“The TwinSpires division exceeded expectations, reporting adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $34.9 million, which was 13% higher than our projected amount and 12% higher than the industry standard. Revenue was also in line with our projections and on par with the industry standard, showing a 2% increase. The adjusted EBITDA margin of 33.5% surpassed both our estimate and the industry average of 30.2% and 30.1%, respectively. This could be attributed to a miscalculation of the impact of Exacta on the product mix, according to Stantial.”
Additional Factors That Could Affect The Value of Churchill Downs’ Stock
Although the first quarter has not yet ended, the second-quarter earnings of Churchill Downs could potentially boost the stock due to the upcoming Kentucky Derby in May. Additionally, the hotel at their Terre Haute Casino Resort in Indiana is anticipated to open in the same month.
Although the Derby is typically regarded as a top event at Churchill Downs, this year marks the debut of new features at the track, such as increased seating, a renovated paddock, and special offerings for VIP guests.
Stantial concluded that the fourth quarter results for CHDN’s properties in Kentucky were in line with our predicted model after adjusting for any inaccuracies in the easy weather comparisons. The properties of Turfway, Newport, Ellis, and Derby City Gaming are steadily increasing in revenue after their openings, acquisitions, and investments in growth. The newly opened Derby City Downtown is expected to experience a significant growth in the second quarter due to the start of summer tourism in Louisville and the high volume of visitors drawn by the Derby.
