Boyd praised; Graft at Wynn?; NFL hypocrisy

Wall Street analysts loved up on Boyd Gaming following its 1Q23 earnings call. Boyd, Deutsche Bank analyst Carlo Santarelli wrote, “delivers another strong performance … the merits of the story remain compelling on a relative basis.” He pushed his price target to $78/share from $76, rating the stock a “Buy.” He added that “while a beat was expected,” investors had to be liking the Las Vegas locals upside, as well as the company’s digital performance and its handling of Sky River Casino in California. “As we previously noted, we did not expect the 1Q23 upside to come as a surprise, nor did we expect the quarter to serve as a meaningful near term catalyst for shares and we remain of this view.” Still he praised Boyd for its Downtown exposure and new amenities there, for its online and managed-casino revenue growth, its healthy balance sheet and for “Capital returns via dividends and buybacks.”

Although both Boyd and Penn Entertainment are exposed to the Louisiana and Mississippi markets, only Penn was singled out by Santarelli for “continued malaise” likely to manifest in its earnings call. Also, the solid performance by Boyd also portends well for Station Casinos when it reports 1Q23 numbers. “As it pertains to [Caesars Entertainment], who will also be hindered by the lagging nature of the Gulf Coast properties, we think the larger story in their regional segment is likely to be the impact of weather in Reno, and we remain modestly below Consensus in the regional segment, though nicely ahead overall given upside in Las Vegas and Digital.” As for Boyd, Santarelli raised his revenue and cash-flow projections for the rest of this year and all of the next.

In Boyd’s locals segment, rated play grew 3% and non-gambling revenue leapt by double digits, driven by hotel bookings (30% more revenue). F&B did much better, too. Downtown was a bit soft (not as much as Louisiana and Mississippi, although management remains sanguine there), with net revenue of $56.5 million. Boyd, Santarelli chronicled, “continues to see strong demand in the Downtown segment, as pedestrian traffic and guest counts continue to increase. Management specifically noted growth being driven by increasing play from its core Hawaiian customers (+10% Y/Y) and from the recent expansion at the Fremont, which saw saw rated play increase 20% Y/Y.”

Online revenue was $123 million, $43 million more than Deutsche Bank expected. Management projects a $50 million digital ROI this year. Reacted Santarelli, “This
would imply flat year over year performance, despite the growth in sports betting that is expected and hence, growth in BYD’s access fee revenue, two new state launches, and what should be better year over year performance from Boyd Interactive.”

Joseph Greff of J.P. Morgan lauded Boyd’s quarter as “steady,” moving his price target to $77/share but refraining from a “Buy” rating, preferring “Over Weight” (which does not mean Boyd is suffering from avoirdupois). He said Boyd’s results “nicely exceeded” what he anticipated, with net revenues vaulting 12% to $964 million. “The upside/growth in its LV Locals segment was generated by increased destination business (tourists/out-of-towners), double-digit growth in non-gaming revenues, and continued strength in play from core customers,” he wrote, adding that hotel biz was trending upward in Q2. Sky River/online delivered way more than expected, $42 million instead of the prognosticated $29 million. Sky River, in particular, could bring in as much as $70 million of cash flow this year (with some Illinois slot route revenues sprinkled in). Like everyone—ourselves included—he applauded Boyd’s net leverage of 2.5X EBITDA.

Credit Suisse‘s Ben Chaiken took a forward-looking view, opining that the worst is probably behind the Deep South segment. Also, the disrupted Treasure Chest near New Orleans should be back in new, improved form by next spring. As for locals and Downtown business, “both segments are benefitting from a return of volumes to the strip (e.g., convention) and will continue to benefit from a lineup of entertainment and sporting events throughout the rest of the year.”

“Atta Boyd!” So exclaimed Truist Securities analyst Barry Jonas. Striking a novel note, he argued that the company’s valuation by Wall Street doesn’t take into account its partnership with FanDuel (the country’s preferred provider of sports betting) or its real estate. He upped his price target to $85/share from $83 and repeated a “Buy” ranking. Jonas observed that, with Dixie backed out of the equation, core-customer gambling at Boyd properties was up 6% last quarter. He broke down the annual managed/other contribution as $50 million or more from Sky River and $10 million from those slot routes in the Land of Lincoln. All in all, well done. Over to you, Station.

Is current Wynn Resorts management taking a page from Skeletor? It is, according to Wynncore slot attendant Sheila Little, who is suing the company for allegedly confiscating her tips and sharing them around to supervisors. This is appalling, if true. Shades of the tip-robbery scheme that cost Wynn over $5.5 million in a settlement with more than 1,000 dealers. Little is suing CEO Matt Maddox & Co. for at least $15,000 in damages. Why is it that, whenever middle-management wages are flagging at Strip resorts, the C-Suite decides to take it out of the hides of floor personnel instead of raising pay? Coming at a time when Wynn is making more than ever, such practices would be at minimum deplorable, to state the obvious.

How much did Station Casinos bank from its recent real estate sale to the Oakland Athletics? At least $150 million, according to Jordan Bender of JMP Securities. Considering that the A’s intend to build a $1.5 billion stadium, with $500 million of that coming out of the skin of John Q. Public, we hope that Station got a lot more than $3 million an acre, maybe closer to the $300 million for 49 acres that Bender thinks the acreage is worth. Tilman Fertitta paid $270 million for six acres, albeit on the Las Vegas Strip, so Station deserves a George payday for its astute transaction. The company is sitting on a great deal more land directly adjacent to the A’s site, so it can still develop something (hopefully not Viva 2.0) that monetizes its proximity to the crowds of baseball fans. Of course, if the Nevada Lege doesn’t come through with a half-billion subsidy, the deal falls through. Will the City of Oakland say “Good riddance” if the A’s come back, hat in hand?

Boy, the Detroit Lions can’t catch a break. Not only are they among the dregs of the NFL, the league just suspended four of their players (plus one from the Washington Commanders) for violating the league’s gambling rules. It seems like the NFL needs to look itself in the mirror when it comes to sports betting. Not only is it in bed with every major provider (and some small fry, too), it allows betting right in its own stadiums, next to the giant jumbotron showing Kevin Hart yapping about “free money.” So it’s hard to work up much outrage over Lions wideouts Jameson Williams and Stanley Berryhill placing wagers from team facilities. Isn’t that what the NFL is encouraging the rest of America to do?

Ditto the betting on games that C.J. Moore, Quintez Cephus and Shaka Toney did. It cost Moore and Cephus their jobs. In the latter’s case it could end his career. While players probably shouldn’t be placing bets on football games—theirs or anyone else’s—the league might have more moral authority if it hadn’t bellied up to the sports-betting trough itself. We suggest a compromise: The NFL closes all in-stadium sports books and ends any league-wide sponsorship deals with sports betting providers, and Moore, Cephus and Toney serve out their suspensions. Clemency for Berryhill and Williams. Fair enough?