Gaming and Leisure, VICI Downgraded on Valuation Concerns
Gaming and Leisure Properties (NASDAQ: GLPI) and VICI Properties (NYSE: GLPI) — the II publically traded cassino landlords — were downgraded on concerns that valuations are stretched and that near-term acquisition opportunity is limited.
In a observe to clients today, Deutsche Bank analyst Carlo Santarelli downgraded both gaming existent land investment funds trusts (REITs) to “hold” from “buy.” He pared his price place on Gaming and Leisure to $52 from $60 while lowering his forecast on Caesars Palace proprietor VICI to $34 from $39. The stocks closed in(p) at $48.15 and $31.33, respectively, today.
Importantly, our downgrade, stems non from any convert to our look at on the businesses or stability of the hard cash flows, but kinda the broader climate, its wallop on M&A activity and business deal accretion, and valuation multiples which we trust are full and unlikely to expand materially inwards the nigh to medium term,” wrote Santarelli.
Both REITs, particularly VICI, utilise acquisitions to step-up geographic and tenant diversity.
High Interest Rates Could Pinch Gaming and Leisure, VICI
The tangible acres sector is unity of the groups most inversely correlated to interest place tightening by the Federal soldier Reserve and with rates mellow today, Gaming and Leisure and VICI are feeling the twitch as both are saddled with year-to-date losses.
There’s also the specter of the exchange camber potentially nurture rates to a greater extent than expected in the back half of the twelvemonth if inflation remains obdurately high, engagement data accelerates to the upside or both. Higher adoption costs equate elevated funding costs for companies, including Gaming and Leisure and VICI. That could halter dealings activity.
“Further, given refinancing activity inward 2024 and 2025, we wait acquired funds from trading operations (AFFO) maturation to farther decelerate, inward the absence seizure of M&A activity, which, we note, has resulted in to a greater extent limited accumulation inwards recent transactions,” added Santarelli.
AFFO is a vital metrical in valuing REITs. Specific to GLPI and VICI, the cassino owners make used smart acquisitions as an avenue for boosting AFFO.
Gaming and Leisure, VICI Fundamentals Still Solid
While he downgraded the stocks, Santarelli noted Gaming and Leisure and VICI remain fundamentally sound and appealing congenator to the broader universe of existent demesne equities.
“We preserve to vista the gaming REIT coordination compound as i that possesses many favourable aspects, when compared to other REIT verticals, and we also believe the stableness of the renter cash in flows, are virtually unrivaled, as evidenced during the COVID shutdowns,” concluded the Deutsche Bank analyst.
While funding costs could live an issue, both REITs experience verbalized an interest in to a greater extent acquisitions. Specific to Gaming and Leisure, that landlord could wrench important financial benefits from the land site of the Tropicana Las Vegas Hotel and Casino decent home to a John R. Major League Baseball (MLB) stadium.
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