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Here's Why Investors Should Retain Boyd Gaming (BYD) Stock

Zacks Equity Research
·3-min read

Boyd Gaming Corporation BYD is benefiting from Las Vegas operations, the FanDuel partnership and the Pala Interactive acquisition. Consequently, the stock has gained 16.7% in the past six months compared with the industry’s growth of 21.8%. However, high costs and intense competition are concerning.

Let’s delve deeper.

Growth Drivers

Boyd Gaming considers the local market in Las Vegas as a major driver for its portfolios. During first-quarter 2023, it reported impressive customer trends with respect to guest counts, frequency and spending.

During the quarter, the Las Vegas segment’s revenues and EBITDAR increased nearly 6% each, year over year. Operating margin was 52.5%. Backed by demand from out-of-town guests, BYD reported a rise in non-gaming revenues. Also, an increase in Hawaiian visitation added to the positives.

Boyd Gaming has also been undertaking efforts to expand online betting offerings. One of the notable initiatives by the company has been regarding the legalization of sports gambling.

During fourth-quarter 2022, BYD made progress in advancing its online strategy by completing the acquisition of Pala Interactive for $170 million. Also, it expanded its partnership with Fan Duel by launching mobile and retail sports betting in Kansas and Ohio. Given the Pala interactive’s technology (featuring a player account management system and iGaming products), and operational and marketing expertise, Boyd Gaming is optimistic in this regard and anticipates the initiative to advance its position in the emerging iGaming market.

In 2020, online gaming contributed more than $10 million in EBITDAR due to FanDuel's mobile sports operation in Pennsylvania, Illinois, Indiana, Iowa and Mississippi. During first-quarter 2023, EBITDAR in online segment was approximately $21 million, reflecting twofold growth on a year-over-year basis. The upside was backed by online gaming launch in Ohio and Kansas, continued growth in existing markets and the addition of Boyd Interactive.

Given a high promotional capital-intensive and competitive landscape, we believe that partnership with FanDuel is likely to drive cash flows in the upcoming periods.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Concerns

Despite several margin-enhancing initiatives, Boyd Gaming has been grappling with higher expenses across food and beverage. During the first quarter, food and beverage expenses were $59.3 million compared with $53.9 million reported in the prior-year quarter. Total operating costs and expenses were $679.1 million compared with $609.7 million reported in the year-ago quarter.

Boyd Gaming is persistently facing intense competition from various casinos, hotels, gaming services, non-gaming resorts and vacation destinations. Evidently, its operations are witnessing heightened competition with new entries in the already high-supply market.

Zacks Rank & Key Picks

Boyd Gaming currently carries a Zacks Rank #3 (Hold).

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Royal Caribbean Cruises Ltd. RCL presently sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 26.4%, on average. The stock has increased 31.8% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates growth of 48.3% and 160.5%, respectively, from the year-ago period’s levels.

Skechers U.S.A., Inc. SKX currently flaunts a Zacks Rank #1. SKX has a trailing four-quarter earnings surprise of 18.8%, on average. The stock has improved 31% in the past year.

The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates gains of 7.8% and 31.9%, respectively, from the year-ago period’s levels.

Crocs, Inc. CROX presently carries a Zacks Rank #2 (Buy). CROX has a trailing four-quarter earnings surprise of 19.6%, on average. The stock has gained 9.2% in the past six months.

The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates rises of 13.2% and 5.7%, respectively, from the year-ago period’s levels.

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Zacks Investment Research