On Tuesday, Century Casinos (NASDAQ:CNTY) stock received an upgrade from JMP Securities, shifting from a Market Perform to Market Outperform rating. The firm has set a price target for the company's stock at $5.00.
This move comes after Century Casinos completed a significant land-based facility in Caruthersville, Missouri, which signifies the end of a cycle of mergers, acquisitions, and refurbishments across its U.S. portfolio.
The completion of this cycle has seen the company's lease-adjusted leverage increase significantly, reaching 6.6x in the third quarter of 2024, up from approximately 1x in 2018. Despite the stock's decline by 77% from its all-time high and 24% year-to-date, compared to the Russell 3000's 19% gain, JMP Securities sees a potential turning point for Century Casinos following its capital expenditure cycle.
JMP Securities anticipates the company's leverage to peak in the third quarter of 2024. The firm expects that Century Casinos' continued focus on execution will lead to EBITDAR growth in the medium term. Furthermore, free cash flow (FCF) is projected to inflect, reaching $83 million from 2024 to the 2026 estimate.
The new $5.00 price target represents 5.5 times the firm's projected free cash flow for 2025 to 2026 and 4.3 times its estimated EBITDA for 2026. This upgrade reflects a positive outlook for Century Casinos' financial performance in the coming years.
In other recent news, Century Casinos reported a marginal decrease in net revenue and adjusted EBITDAR in its Q3 2024 earnings call. The company's net revenue was reported at $156 million, reflecting a 3% year-over-year decrease, while adjusted EBITDAR stood at $32.9 million, a 1% dip.
Despite this, Century Casinos noted an improvement in EBITDAR margin and expressed optimism for future growth, primarily due to the reopening of their Polish casino and the launch of a new establishment in Missouri.
The company's East segment saw a 7% revenue increase, while the Midwest segment's revenue remained consistent. Century Casinos is also considering stock buybacks, with an existing resolution allowing for $15 million in share repurchases. The company's executives have projected an optimistic outlook for 2025, with an expected EBITDAR of $150 million.
These developments follow a slight revenue decline due to the temporary closure of the Polish casino and competition in the Canadian market. However, the company is hopeful about future growth through operational efficiencies and improved event planning. These are some of the recent developments for Century Casinos.
InvestingPro Insights
Recent InvestingPro data provides additional context to JMP Securities' upgrade of Century Casinos (NASDAQ:CNTY). The company's market cap stands at $113.53 million, with a revenue of $587.39 million for the last twelve months as of Q2 2024, showing a robust growth of 27.26% over the same period. This aligns with JMP Securities' expectation of EBITDAR growth in the medium term.
However, investors should note that Century Casinos is currently operating with a significant debt burden, as highlighted by one of the InvestingPro Tips. This corroborates the article's mention of the company's increased lease-adjusted leverage, which reached 6.6x in Q3 2024. Another InvestingPro Tip indicates that the company is quickly burning through cash, which could be a result of its recent capital expenditure cycle, including the completion of the Caruthersville facility.
On a positive note, the stock has shown strong returns over the last month and three months, with price total returns of 45.1% and 47.41% respectively. This recent performance may be reflecting the market's growing confidence in Century Casinos' future prospects, as outlined in JMP Securities' upgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Century Casinos, providing a deeper understanding of the company's financial health and market position.
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