Full House, Golden Entertainment Estimates Pared, Analyst Remains Constructive

The latest issue confounding already sagging casino equities is sell-side analysts revising estimates and price targets lower to reflect the specter of a potential economic slump. That s amid elevated fears of a material pullback in consumer discretionary spending,

Analysts aren’t playing favorites, either. They’re dialing back price projections and revenue forecasts on a variety of gaming companies, including those with , regional operators, and more. Full House Resorts (NASDAQ:FLL) and Golden Entertainment (NASDAQ:GDEN) are part of that group.

In a new note to clients, B. Riley analyst David Bain pares estimates on several regional casino names. That includes that pair of aforementioned operators, but remains broadly constructive on the group.

We lower FY22E/FY23E 1%/1% to better capture elevated out of COVID local market comparables, third quarter seasonality, as well as Maryland and Laughlin casino distance from primary feeder markets given elevated gas prices,” he says of Golden.

The analyst maintains a “buy” rating on the Strat operator with a $70 price target, implying upside of 70.7% from the July 19 close.

Golden isn’t immune to the this year — one caused by high inflation and increasing concerns about a looming recession.

However, the operator’s exposure to the still-sturdy Las Vegas locals market and free cash flow-generating capabilities make it one of Wall Street’s preferred small-cap gaming names. That cash flow creates opportunities for .

“We continue to expect consistent share repurchases and GDEN to again ‘re-up’ its $50M buyback authorization this year,” adds Bain. GDEN’s unique Nevada portfolio leverages migration trends from California anchored by increasing city-wide amenities/wealth creation benefiting its hyper-local/local gaming offerings, while also capturing Strip out-of-COVID tailwinds through.”

Additionally, Golden owns all of its real estate — meaning it has levers to pull should it need to raise capital — and trades at noticeable enterprise value/EBITDA discounts relative to its peer group.

Shares of Full House are off 51% year-to-date, and Bain is lowering 2022 through 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates on the Silver Slipper operator. Still, the analyst sees avenues for the shares to rebound, in Cripple Creek, Colo. and Waukegan, Ill.

“The addition of Waukegan and Chamonix should increase EBITDA to $132.8M, or 280% from our CY22E EBITDA of $34.9M. We believe Waukegan remains likely to open before the end of the year and Cripple Creek by summer CY23E,” notes the analyst.

He adds that despite inflation and supply chain issues, the company’s construction costs on those projects is the same or only slightly higher than previously forecast. The analyst rates Full House a “buy” with a $17 price target, which is nearly triple where the stock closed on Tuesday.