On Monday, BofA Securities adjusted its stance on Red Rock Resorts (NASDAQ:RRR), upgrading the stock from Underperform to Neutral. This shift in rating comes despite a reduction in the price target to $55.00 from the previous $57.00.
The reassessment follows a 15% decline in the company's shares since April 25, which was attributed to two main factors: Boyd Gaming (NYSE:BYD)'s report of a weakening local market in Las Vegas and Red Rock Resorts' first-quarter results, which met consensus expectations but did not surpass the high anticipations.
The analyst from BofA Securities cited the recent sell-off in Red Rock Resorts' shares as a reason for the upgrade, suggesting that the risk-reward balance for the company's stock is now more even.
Despite Boyd Gaming's concerning remarks about the core local market in Las Vegas, Red Rock Resorts does not appear to be experiencing the same issues in their specific sub-markets. Additionally, the analyst pointed out that market comparisons are expected to become less challenging in the second quarter.
The report also mentioned the potential impact of Durango, a project that Red Rock Resorts has previously spoken about positively, suggesting it could be driving some of the same-store softness seen recently.
In response to these market trends, BofA Securities has revised its 2024 estimates for Red Rock Resorts, acknowledging weaker trends in the local customer base but offsetting this partially with the anticipated performance of Durango.
In conclusion, the price objective has been adjusted to $55, reflecting slightly lower earnings estimates for the company. This new target takes into account both the current market conditions affecting the Las Vegas locals' segment and the expected contributions from Durango.
InvestingPro Insights
In light of BofA Securities' recent reassessment of Red Rock Resorts (NASDAQ:RRR), investors may find additional context in the latest data and insights from InvestingPro. The company operates with a significant debt burden and its stock price movements have been quite volatile, with a 16.09% decline over the past month. However, Red Rock Resorts boasts impressive gross profit margins, which stood at 63.2% over the last twelve months as of Q1 2024. This financial metric is particularly pertinent as it suggests the company has been effective in managing its cost of sales and maintaining profitability.
The company's market capitalization is currently $5.28 billion, and it is trading at a high Price / Book multiple of 39.01. Despite recent price volatility, Red Rock Resorts has maintained dividend payments for 9 consecutive years, offering a dividend yield of 3.98% as of the latest data, which may appeal to income-focused investors.
For those looking to delve deeper into Red Rock Resorts' financials and stock performance, there are additional InvestingPro Tips available at https://www.investing.com/pro/RRR. These tips offer a comprehensive analysis of the company's financial health and market position. Investors can gain further insights by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a wealth of exclusive financial information and expert analysis.
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