Analyst Still Optimistic On Casino Stocks, Upgrades Boyd Gaming

Casino stocks have taken a beating in recent weeks, and one Wall Street analyst says it’s time for investors to step in and buy the dip in a handful of top stocks.

The Analyst

Jefferies analyst David Katz updated his ratings and price targets for the following gaming stocks:

Upgraded Boyd Gaming Corporation BYD from Hold to Buy and reiterated a $42 price target.
Downgraded Wynn Resorts, Limited WYNN from Buy to Hold and lowered his price target from $229 to $170.
Reiterated a Buy rating and $36 price target for MGM Resorts International MGM.
Reiterated a Buy rating and $40 price target for Penn National Gaming, Inc. PENN.
Reiterated a Buy rating and $40 price target for Golden Entertainment Inc GDEN.

The Thesis

According to Katz, the Macau gaming market has certainly lost some luster, but the steep sell-off in casino stocks since the beginning of earnings season isn’t in-line with the reality of the market.

“The recent earnings season produced share price reactions that we believe in most cases are not consistent with the reported results, or expectations for future results,” Katz said.

He said a weak economy and new market supply have weighed on Macau growth and created uncertainty about the future. However, fundamentally strong Las Vegas and regional markets in the U.S. coupled with additional M&A opportunities in the casino space paint an optimistic outlook for most stocks.

The lone exception is Wynn, which Katz said may face a difficult growth trajectory given its management turmoil and standstill agreement with 9 percent owner Elaine Wynn.