On Tuesday, Monarch Casino & Resort , Inc. (NASDAQ:MCRI) received an upgrade from Truist Securities, shifting from a Hold to a Buy rating.
The upgrade comes after a period of solid performance by Monarch Casino (EPA:CASP), despite a mixed year relative to the broader market.
Truist Securities noted Monarch Casino's strong performance in 2024, with a 14% increase in stock value, although it underperformed compared to the S&P 500's 23% gain.
The firm's analysts highlighted the quality characteristics of Monarch Casino that they believe will continue to attract investor interest. Both of Monarch's properties, located in Black Hawk and Reno, are considered top-tier establishments with high-end amenities that appeal to a wealthier clientele.
Despite the Black Hawk expansion being in its later stages of growth, Truist Securities sees ongoing opportunities to expand the VIP segment, bolstered by growth in the Denver metropolitan area.
Reno's prospects are also looking up as the business-friendly environment and proximity to California are advantageous, and the property is expected to regain market share following the completion of renovations in the second quarter of 2025.
Monarch Casino's financial position is also a strong point, with a net leverage of -0.3x, which Truist Securities identifies as the best balance sheet among the companies they cover. This strong financial standing provides Monarch with significant merger and acquisition (M&A) optionality. Trusist revised its price target to $100.00, up from the previous $82.00.
Although management has been selective, focusing on quality and growth without overpaying, Truist anticipates potential M&A opportunities may emerge, both as a buyer and a seller.
The analysts also suggest that Monarch's high-quality assets, including a Colorado sports betting license, could be attractive to potential buyers, especially with its low leverage. They speculate that a sale involving a real estate investment trust (REIT) could result in a 15-45% upside to the company's current valuation levels.
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