On Tuesday, investment firm Raymond James initiated coverage on Boyd Gaming (NYSE:BYD (SZ:002594)) stock, assigning an Outperform rating with a price target of $67.00. This new rating comes after the company reported weaker than expected first-quarter results, which led to a significant drop in its share price.
Boyd Gaming's first-quarter performance prompted a cautious stance from management during their earnings call, contributing to a roughly 15% decline in the company's shares.
Despite expectations of another challenging quarter ahead, Raymond James believes that the current stock price already reflects lowered earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) expectations.
The firm underlined Boyd Gaming's balance sheet strength and the value of its owned real estate as reasons for a premium multiple. Continued share buybacks are also seen as a factor that should provide support to the stock price.
To arrive at the $67 price target, Raymond James employed a valuation approach that combines EBITDA multiples with a sum-of-the-parts analysis.
This included applying a 6.7x average EBITDAR multiple to Boyd Gaming's land-based and digital operations. After adjusting for net debt and capitalized lease debt, they added an estimated $450 million value for the company's 5% stake in FanDuel, which led to the determination of the per-share value.
InvestingPro Insights
Boyd Gaming (NYSE:BYD) has been under the spotlight following its recent earnings report and the subsequent initiation of coverage by Raymond James. An Outperform rating and a price target of $67.00 indicate a positive outlook from the investment firm. To provide further context to investors, recent data from InvestingPro shows that Boyd Gaming has a market capitalization of $5.23 billion and a price-to-earnings (P/E) ratio of 9.86, which adjusts to 8.08 on a last twelve months basis as of Q1 2024. This suggests a potentially undervalued position relative to earnings, especially considering the company's impressive gross profit margin of 63.11% for the same period.
Moreover, InvestingPro Tips highlight that management's aggressive share buyback strategy and a high shareholder yield could be seen as positive signs of confidence in the company's value. Additionally, despite some analysts revising their earnings downwards for the upcoming period, Boyd Gaming is still expected to be profitable this year and has been profitable over the last twelve months. For investors seeking long-term growth, it's worth noting that Boyd Gaming has demonstrated a strong return over the last five years.
For those interested in a deeper analysis, InvestingPro offers more tips that could help in making informed investment decisions. Use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to 10 more InvestingPro Tips for Boyd Gaming.
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