On Monday, Boyd Gaming Corporation (NYSE:BYD (SZ:002594)) experienced a change in stock rating as Susquehanna shifted its view from Positive to Neutral. Accompanying this downgrade, the firm also adjusted the price target for Boyd Gaming's shares to $75 from the previous $84. This decision reflects the analyst's expectations of revenue challenges the company may face in 2024, particularly in its most lucrative segment, Las Vegas Locals.
The analyst cited multiple factors contributing to the downgrade, including anticipated regional revenue declines in the first quarter of 2024, insufficient contributions from the Downtown segment, and low prospects for the company's digital B2C initiatives. Additionally, there are concerns that Boyd Gaming's market access take rate with FanDuel may be renegotiated to a lower rate before the year 2028.
Despite these headwinds, Susquehanna acknowledged Boyd Gaming's strong cost control measures, which have been maintained at approximately $460 million in land-based operational expenses per quarter. The firm suggests that while Boyd Gaming's cost management is likely to continue at an exceptional level, the stock may encounter a limit in value growth if the company's main drivers are focused on balancing cost control against declining revenue and capital returns.
The downgrade reflects a cautious stance on the company's near-term prospects, as the analyst anticipates that the challenges in Boyd Gaming's key segments could weigh on its financial performance. The new price target of $75 represents a recalibration of expectations in light of these anticipated industry dynamics.
Boyd Gaming, with its diversified portfolio of gaming and hospitality properties, remains a significant player in the sector. However, the current assessment by Susquehanna suggests investors may need to temper their expectations for the company's stock performance in the face of the outlined revenue pressures.
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