Stock Analysis & Ideas

Boyd Gaming Stock: Worth Betting On

Boyd Gaming (BYD) is a casino and entertainment operator in the United States. The company operates 28 properties dispersed in 10 states across the country, including Nevada, the Midwest, and the South.

The “big game” is coming up, and what better time to discuss gambling and casino stocks? According to the American Gaming Association, over $7 billion will be bet on the game, including bets made at sportsbooks and those made just between friends. The proliferation and acceptance of gambling continue across the country, and casinos like Boyd Gaming benefit tremendously.

Gambling and sports were until recently not embraced by the major sports leagues. There were no teams in Las Vegas. The leagues were concerned with their image and distanced themselves from the sports gambling industry. This is no longer the case.

The major sports leagues and major sports networks now embrace sports betting and promote it. It drives viewership, fan interest, and advertising revenue. As evidence of its acceptance, there are currently two major professional teams in Las Vegas, the NHL’s Las Vegas Golden Knights and the NFL’s Las Vegas Raiders.

This is a significant boon for casino operators across the country. Boyd Gaming benefits through the sportsbooks located inside its casinos and through its mobile sports betting app.

An Impressive 2021 Comeback

2020 was a trying time for Boyd Gaming and for casino operators everywhere. The pandemic caused closures, capacity restrictions, and economic uncertainty, which negatively affected results.

Total revenue in 2020 dropped nearly 35% from 2019, and the company posted a net loss. With the economy on a path to reopening in 2021, revenue exceeded 2019. Total revenue for Fiscal 2021 reached ~$3.4 billion, a 55% increase over 2020 and a modest increase over the $3.3 billion earned in 2019.

Boyd Gaming also returned to net profitability with an impressive $464 million in net income earned. This is a tremendous improvement over the $135 million net loss in 2020. The company pulled in $4.07 per share.

This terrific showing has brought the forward price-to-earnings (P/E) ratio down to under 17.4 and just 13.7 on a forward basis. This compares favorably with peers like Red Rock Resorts and Bally’s Corporation, which trade at forward P/E ratios close to 20 and 17, respectively.

The Dividend Is Back

Another excellent development for shareholders is the return of the dividend. The dividend was suspended in 2020 due to the pandemic. In 2019, the company was paying out a modest $0.07 quarterly. The dividend has now been reinstated at $0.15 quarterly. This amounts to an annual yield of 0.85%.

The company also resumed its share buyback program in late 2021. The board of directors authorized an additional $300 million in buybacks. This amounts to almost 4% of the current market cap. Share buybacks benefit investors by reducing the shares available, thereby increasing the company’s earnings per share. It also allows the company to purchase shares on the open market in case of a pullback in the stock price, supporting the stock price.

Wall Street’s Take

Turning to Wall Street, analysts are somewhat bullish on Boyd Gaming’s stock. Analysts have a consensus Moderate Buy rating based on five Buys, two Holds, and no Sell ratings.

The average Boyd Gaming price target of $81.43 implies 14.5% upside potential.

The Bottom Line on Boyd Gaming

The future appears bright for Boyd Gaming. Gambling is proliferating across the country, and Boyd has diverse locations which will benefit. The company also will continue to benefit from the boom in sports betting, both in person and on its mobile app.

The company’s results have now exceeded 2019 levels after predictably suffering in 2020. The reinstatement of the dividend and resumption of share buybacks are positive developments for shareholders. The stock is up over 18% in the last six months yet remains reasonably valued relative to its peers. Because of this, Boyd Gaming stock may have further to climb.

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