Boyd Gaming: A Bull-Case Theory
Sunday, Nov 3, 2024 8:57 am ET
Boyd Gaming Corporation (BYD) has been a standout performer in the gaming industry, with a strong track record of growth and value creation. As the company continues to navigate a dynamic market landscape, a bullish case can be made for its long-term prospects. This article explores the key factors supporting a bullish outlook on Boyd Gaming, including its strategic capital deployment, growth initiatives, and hidden value.
Boyd Gaming's trailing EV/EBITDAR multiple of 8x is slightly above its historical average of 7-10x but below its 52-week high of 10.6x. This suggests that the stock may be undervalued compared to its historical trading range. Additionally, Boyd Gaming's multiple is lower than its peers, such as Red Rock Resorts (RRR) at 11x EBITDAR, indicating that the market may be underestimating the company's potential.
Boyd Gaming's 5% stake in FanDuel, valued at $875 million or approximately $9.20 per share, is a significant driver of the company's hidden value. This strategic partnership enables Boyd Gaming to avoid the cash burn experienced by competitors, as it leverages FanDuel's online and mobile sports betting platform without incurring substantial development costs. As the sports betting market continues to grow, Boyd Gaming's stake in FanDuel positions the company to benefit from increased market access and online sports betting revenues.
The Las Vegas Locals segment alone is valued at $5.7 billion based on peer Red Rock Resorts' multiple of nearly 11x EBITDAR, suggesting a sizeable discount to Boyd Gaming's historical trading multiple range of 7-10x EBITDAR. This further underscores the potential upside in Boyd Gaming's valuation.
Boyd Gaming's strategy of partnering with FanDuel for online and mobile sports betting provides a significant competitive advantage. This partnership allows Boyd Gaming to leverage FanDuel's established brand and technology in the online betting space, generating additional revenue streams without the need for substantial investment in infrastructure or marketing. As a result, Boyd Gaming has been able to maintain a highly conservative capital deployment strategy, focusing on moonshot projects that align with its management approach. This strategy has contributed to the company's strong financial performance, with a net leverage ratio of just 2.5x EBITDAR and a net margin of 14.45%.
Boyd Gaming's owned real estate and steady cash flow are attractive to potential private equity investors. A take-private transaction or acquisition by FLUT (FanDuel's parent company) could unlock significant value for Boyd Gaming. In healthy economic periods, Boyd Gaming has historically traded between 8.5 and 10 times EBITDAR, implying a valuation of $95 to $128 per share, offering a sizeable upside from current levels.
Boyd Gaming's recent investments in property enhancements and acquisitions have significantly contributed to its revenue growth and market expansion. In 2023, the company reported record results, driven by strong returns from recent property investments and a diversified portfolio. Boyd Gaming's management teams have demonstrated their ability to efficiently manage the business, achieving property-level operating margins above 40% for both the fourth quarter and full year. The company's balanced approach to capital allocation, returning over $475 million to shareholders while investing in properties and maintaining a strong balance sheet, has positioned it for continued profitable growth and long-term shareholder value.
Boyd Gaming's partnership with FanDuel Group has significantly boosted its online gaming and sports betting revenue streams. In Q2 2024, Boyd Gaming's Online segment produced strong revenue and Adjusted EBITDAR growth, reflecting increased contributions from market-access agreements nationwide. This partnership allows Boyd Gaming to avoid the cash burn experienced by competitors, as it leverages FanDuel's existing partnership and market access. Looking forward, this relationship is likely to continue driving growth in Boyd Gaming's online gaming and sports betting revenues, as well as providing additional market access opportunities.
Boyd Gaming's disciplined capital allocation strategy has been a key driver of its value creation and shareholder returns. The company has consistently returned capital to shareholders through share repurchases and dividends, with over $200 million in share repurchases and nearly $200 million in dividends in the second quarter of 2024 alone. Additionally, Boyd Gaming has made strategic investments in its properties, such as the recent expansion of the Fremont, which has delivered record quarterly results. This balanced approach to capital allocation has allowed Boyd Gaming to maintain strong free cash flow, while also investing in its business and returning value to shareholders.
In conclusion, Boyd Gaming's bullish case is supported by its strategic capital deployment, growth initiatives, and hidden value. The company's undervalued valuation, strong financial performance, and attractive partnership with FanDuel position it for continued growth and value creation. As Boyd Gaming continues to execute on its strategic vision, investors should consider the compelling bullish case for this gaming industry leader.
Boyd Gaming's trailing EV/EBITDAR multiple of 8x is slightly above its historical average of 7-10x but below its 52-week high of 10.6x. This suggests that the stock may be undervalued compared to its historical trading range. Additionally, Boyd Gaming's multiple is lower than its peers, such as Red Rock Resorts (RRR) at 11x EBITDAR, indicating that the market may be underestimating the company's potential.
Boyd Gaming's 5% stake in FanDuel, valued at $875 million or approximately $9.20 per share, is a significant driver of the company's hidden value. This strategic partnership enables Boyd Gaming to avoid the cash burn experienced by competitors, as it leverages FanDuel's online and mobile sports betting platform without incurring substantial development costs. As the sports betting market continues to grow, Boyd Gaming's stake in FanDuel positions the company to benefit from increased market access and online sports betting revenues.
The Las Vegas Locals segment alone is valued at $5.7 billion based on peer Red Rock Resorts' multiple of nearly 11x EBITDAR, suggesting a sizeable discount to Boyd Gaming's historical trading multiple range of 7-10x EBITDAR. This further underscores the potential upside in Boyd Gaming's valuation.
Boyd Gaming's strategy of partnering with FanDuel for online and mobile sports betting provides a significant competitive advantage. This partnership allows Boyd Gaming to leverage FanDuel's established brand and technology in the online betting space, generating additional revenue streams without the need for substantial investment in infrastructure or marketing. As a result, Boyd Gaming has been able to maintain a highly conservative capital deployment strategy, focusing on moonshot projects that align with its management approach. This strategy has contributed to the company's strong financial performance, with a net leverage ratio of just 2.5x EBITDAR and a net margin of 14.45%.
Boyd Gaming's owned real estate and steady cash flow are attractive to potential private equity investors. A take-private transaction or acquisition by FLUT (FanDuel's parent company) could unlock significant value for Boyd Gaming. In healthy economic periods, Boyd Gaming has historically traded between 8.5 and 10 times EBITDAR, implying a valuation of $95 to $128 per share, offering a sizeable upside from current levels.
Boyd Gaming's recent investments in property enhancements and acquisitions have significantly contributed to its revenue growth and market expansion. In 2023, the company reported record results, driven by strong returns from recent property investments and a diversified portfolio. Boyd Gaming's management teams have demonstrated their ability to efficiently manage the business, achieving property-level operating margins above 40% for both the fourth quarter and full year. The company's balanced approach to capital allocation, returning over $475 million to shareholders while investing in properties and maintaining a strong balance sheet, has positioned it for continued profitable growth and long-term shareholder value.
Boyd Gaming's partnership with FanDuel Group has significantly boosted its online gaming and sports betting revenue streams. In Q2 2024, Boyd Gaming's Online segment produced strong revenue and Adjusted EBITDAR growth, reflecting increased contributions from market-access agreements nationwide. This partnership allows Boyd Gaming to avoid the cash burn experienced by competitors, as it leverages FanDuel's existing partnership and market access. Looking forward, this relationship is likely to continue driving growth in Boyd Gaming's online gaming and sports betting revenues, as well as providing additional market access opportunities.
Boyd Gaming's disciplined capital allocation strategy has been a key driver of its value creation and shareholder returns. The company has consistently returned capital to shareholders through share repurchases and dividends, with over $200 million in share repurchases and nearly $200 million in dividends in the second quarter of 2024 alone. Additionally, Boyd Gaming has made strategic investments in its properties, such as the recent expansion of the Fremont, which has delivered record quarterly results. This balanced approach to capital allocation has allowed Boyd Gaming to maintain strong free cash flow, while also investing in its business and returning value to shareholders.
In conclusion, Boyd Gaming's bullish case is supported by its strategic capital deployment, growth initiatives, and hidden value. The company's undervalued valuation, strong financial performance, and attractive partnership with FanDuel position it for continued growth and value creation. As Boyd Gaming continues to execute on its strategic vision, investors should consider the compelling bullish case for this gaming industry leader.