Politzer’s JP Morgan colleague Joseph Greff raised his price target on Boyd Gaming 25% after seeing its 2Q20 numbers, which he said “were much better than we expected … BYD, like pretty much every regional gaming operator will likely do this earnings season, reported meaningfully lower operating expenses (much lower marketing, corporate, SG&A, and labor expenses plus benefits from shutting down unprofitable segments like F&B, which isn’t negatively impacting demand), allowing it to generate impressive year-over-year margin gains.” Greff predicted, “Demand in July is reported to be similar to June, with higher spend per visit year-over-year reflecting a positive customer mix shift.” He continued to stump for BYD as a good play for those wishing to invest in sports betting, pointing to the company’s FanDuel alliance. Second-quarter revenues of $210 million zoomed past the Street’s consensus $178 million and cash flow, expected to be negative, was well into the black. “Management noted that since reopening, overall visitation and revenues have been lower y/y, but spend per visit is strong, and the company has reduced operating and marketing expenses significantly.”
The fly in the ointment is Downtown, where casinos are “under pressure,” with California Hotel the only Boyd property to post negative cash flow. Boyd’s strong performance came in spite of gaming revenues at its 16 reopened properties being 18% down from 2Q19. Las Vegas locals casinos were hit hard, down 28%. Downtown was a virtual write-off, plunging 60%. Greff forecasts a strong recovery in 2021 and a milder one in 2022, save for Downtown, where it will be “modest” for two years (!). Boyd has 19 months’ worth of liquidity and $1.3 billion cash on hand, some of which will be dedicated to reducing debt. The company can thank its strong regional network for bailing out the disaster area which Las Vegas is proving to be. Broken down by region by Deutsche Bank‘s Carlo Santarelli, Las Vegas locals were off 78% ($49 million), Downtown revenue was a practically nonexistent $5 million (-93%), while the Midwest and South softened 72% ($156.5 million). We like Greff’s optimism but Boyd has a tough row to hoe.
