Golden Entertainment Cooled by Hot Summer, Analyst Still Bullish

Golden Entertainment Cooled by Hot Summer, Analyst Still Bullish

Some would-be gamblers avoided local casinos and gaming bars in Laughlin and Las Vegas since this summer was the hottest on record in southern Nevada. Consequently, analyst David Bain of B. Riley reduced his projections for Golden Entertainment (NASDAQ: GDEN).

Bain, however, is still positive about the stock and has reiterated his "buy" recommendation with a new price objective of $40 instead of $44. According to that revised prediction, the shares might rise by around 33% from where they are now. Given that Golden's stock has down 3.23% over the last ninety days, leading to a 25.48% year-to-date loss, there is some support for the idea that a hot summer affected the company.

"This summer was the hottest in Las Vegas weather history, negatively impacting attendance at local resorts, casinos, and taverns, in our view,” wrote Bain. “Further, while LV convention attendance remains stable, July convention attendance was -7%, tied to show rotation cycles and the absence of the AWFS Fair held last July. We believe Laughlin traffic, while still up, slowed slightly in 3Q, and overall lower-tier customer weakness across the industry continues.”

The Aquarius and Edgewater in Laughlin are owned and operated by Golden, which competes with Caesars Entertainment (NASDAQ: CZR) for the top slot in that market.

Golden Entertainment Could Benefit from Strat

The casino hotel is the most prestigious property in the Golden Portfolio, and although the Strat isn't officially on the Las Vegas Strip, it's close. The strat's weekend occupancy rates have been strong, but midweek occupancy is still below 2019 levels, according to Bain, who reduced Golden's 2024 and 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) projections.

"We believe occupancy back to CY19 levels equates to $15M+ EBITDA at the STRAT, a vast majority of which is not factored into consensus or our estimates. We expect forward city-wide convention attendance trends, particularly beginning in 4Q24E, to serve as an intermediate-term positive for STRAT midweek occupancy,” noted the analyst.

Bain noted that Atomic Golf, which debuted in March, may provide Strat with a quarterly EBITDA gain of $1 million to $2 million. The Tropicana's demolition and the Mirage's temporary shutdown have also benefited the Strat, according to Bain and other analysts.

It is ideal to concentrate on share buybacks.

Golden is probably going to keep focusing on giving investors their money back, mostly by buying back its own stock.

"We believe GDEN continues to repurchase shares, and it will likely exhaust the remaining $61M on its share repurchase before the end of the year, in our view,” said the analyst. “Given net leverage 1 turn below its 3.0x target, we believe GDEN could look to utilize both free cash flow and a portion of its $240M undrawn revolver to continue significant share repurchases through next year.”

With interest rates dropping, Bain continued, Golden might think about selling the property where its casinos are located, which could increase the value of each share by $12. The business has not stated that it is taking such deals into consideration.