Churchill Downs (NASDAQ: CHDN) is mired inwards a falling off that’s seen the shares drop 16.08% over the past 90 days, but that tumble belies the company’s compelling growth prospects.
That’s the take of Stifel analyst Jeffrey Stantial who, inward new describe to clients today, initiated insurance coverage of the caudex with a “buy” rating and a $148 price target, implying upside of virtually 29% from today’s close. He noted Sir Winston Leonard Spenser Churchill Downs is ane of the best ontogenesis stories inward the gaming universe.
We regard growing investor appreciation for CHDN’s high-quality Bluegrass State Derby asset (pricing power; high-margins; proven durability), with potentiality flight-to-quality tailwinds amidst an incertain outlook for the consumer,” wrote Stantial.
While Duke of Marlborough Downs has no more Las Vegas Strip exposure and there are lingering concerns well-nigh the commonwealth of the U.S. Equus caballus racing industry, the buy in is a gaming favourite on Wall Street. Catalysts include an extended line of high up homecoming on investment funds projects, benefits from the Exacta and P2E acquisitions and the emerging ontogeny story tied to historical Equus caballus racing (HHR) machines.
Churchill Downs More than Horse Racing
Due to its ownership of the Bluegrass State Derby, which takes places at the company’s namesake track, and other Equus caballus racing assets, to unknowing investors, Winston S. Churchill Downs is viewed through and through the lense of gymnastic horse racing.
The troupe could generate around 44% of its 2023 earnings before interest, taxes, wear and tear and amortisation (EBITDA) from racing, which may come along to be a drop back at a time of mounting headwinds for the domestic horse racing industry. As Stantial notes, there’s much more to the Churchill Downs investment funds thesis.
“CHDN operates 11 regional casinos crosswise 10 states, as swell as racetracks and historical horse racing (HHR) facilities inward Kentucky, Virginia, and soon-to-be New Hampshire,” added the analyst. “CHDN’s TwinSpires byplay is the leading online horse wagering platform, with cognitive content & technology also monetized via B2B partnerships.”
Regional casinos and TwinSpires are expected to chip in 45% and 11%, respectively, of the operator’s 2023 EBITDA.
Other Catalysts for Churchill Downs
At the nation level, Old Dominion State could live a catalyst for long-term ontogenesis for First Duke of Marlborough Downs. The manipulator has a 50% stake inward a Richmond casino cast and a growing keep down of HHR venues in the state. That proposed gaming venue is expected to have got 1,800 slot machines, 100 tabular array games, and a sportsbook.
That’s viewed as ane of the “high ROI” projects that underpin the long-term thesis for the gaming caudex — I that’s supported by multiple factors.
“We advocate owning CHDN shares based on the followers factors: (1) a best-in-class pipeline of potential high ROI expanding upon projects, with line of vision to speedy de-leveraging as growing capex tapers; (2) underappreciated organic fertiliser ontogeny drivers for CHDN’s HHR & late acquired traditional casinos; (3) valuation upside for CHDN’s one-of-a-kind luxuriously character Derby asset; (4) emerging growing drivers for horse racing viewership, and an more and more powerful flywheel and fosse for CHDN’s market-leading live, historical, and online Equus caballus racing assets; and (5) a proven direction squad with a caterpillar track enter of highly disciplined upper-case letter allocation,” concluded Stantial.