On Wednesday, Boyd Gaming Corporation (NYSE:BYD (SZ:002594)) experienced a shift in its stock rating, as it was downgraded from 'Buy' to 'Hold' by Argus.
The downgrade was prompted by anticipated pressure on Boyd Gaming's Las Vegas Locals segment due to the launch of a new competitor's venue.
Despite the downgrade, the company is expected to see some positive developments. Argus projects a moderate revenue increase in 2024, coupled with only a modest rise in earnings. Solid revenue growth and an active share buyback program are anticipated to contribute to earnings. However, these benefits may be partially negated by a rise in operating expenses and costs associated with property renovations.
The Downtown Las Vegas operations of Boyd Gaming are forecasted to expand following the acquisition of several new locations. Furthermore, the Online segment of the company is set to continue delivering robust performance. Over a more extended period, the analyst predicts that Boyd Gaming's operating margin will improve, thanks to favorable operating leverage at its Las Vegas and certain regional properties.
Boyd Gaming's development pipeline is substantial, and it is reflected in the long-term earnings growth rate estimate of 18%. This outlook suggests that while there may be challenges in the short term, the company's strategic initiatives are expected to yield significant benefits in the future.
InvestingPro Insights
Amid the recent downgrade, Boyd Gaming Corporation's stock has shown resilience, supported by strategic financial maneuvers and solid fundamentals. According to InvestingPro data, Boyd Gaming boasts an adjusted market capitalization of $5.12 billion, with an attractive P/E ratio of 8.8, which further adjusts to 8.12 when considering the last twelve months as of Q1 2024. This valuation is supported by a robust gross profit margin of 63.15% over the same period, signaling efficient operations and strong pricing power.
InvestingPro Tips highlight that management's aggressive share buyback program is a vote of confidence in the company's value, which could be a positive signal to investors. Moreover, the stock's recent entry into oversold territory, as suggested by the Relative Strength Index (RSI), may indicate a potential turning point for investors looking for entry opportunities. With analysts predicting profitability for the year and a high return over the last decade, these factors could be pivotal in the stock's recovery.
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