On Tuesday, JPMorgan (NYSE:JPM) adjusted its financial outlook for Red Rock Resorts (NASDAQ:RRR) stock, reducing the price target to $63 from the previous $69 while retaining an Overweight rating.
The reassessment follows a reported soft performance in the first quarter of 2024 by Boyd Gaming (NYSE:BYD) Corporation in the Las Vegas Locals market, which has revealed competitive pressures and consumer softness.
The firm has revised its EBITDA estimates for Red Rock Resorts for the years 2024 and 2025, decreasing them by 3% and 2%, respectively. The revision is attributed to concerns about the Las Vegas Locals segment, where Boyd Gaming's performance has been lackluster.
Despite the adjustments, JPMorgan does not anticipate any risk to the EBITDA contribution from Red Rock's Durango project, nor does it foresee cannibalization of Red Rock properties.
The reassessment by JPMorgan comes in the wake of a notable 9% decline in Red Rock Resorts' share value last Friday. The drop was a reaction to Boyd Gaming's quarterly results and its commentary on the Las Vegas Locals market, which appears to be experiencing a slowdown, particularly among non-high-end consumer segments.
JPMorgan's analysis suggests that while Red Rock Resorts' high-end properties are not expected to be significantly affected, there is a perceived risk for the company's non-high-end properties. This risk is associated with a potential downturn in consumer spending within the Las Vegas Locals segment.
InvestingPro Insights
As investors consider JPMorgan's revised outlook for Red Rock Resorts, it's essential to integrate current market data and performance indicators into their analysis. According to real-time data from InvestingPro, Red Rock Resorts has a market capitalization of $5.79 billion and is trading at a Price/Earnings (P/E) ratio of 17.92, which adjusts slightly to 17.11 when looking at the last twelve months as of Q4 2023. The company's revenue growth in the same period shows an increase of 3.62%, with a more robust quarterly growth rate of 8.75% for Q4 2023.
Two notable InvestingPro Tips for Red Rock Resorts investors are the company's impressive gross profit margins and the large price uptick over the last six months. The gross profit margin stands at a strong 63.67% for the last twelve months as of Q4 2023, which underscores the company's efficiency in managing its cost of goods sold and could be a buffer against competitive pressures in the Las Vegas Locals market. Furthermore, the stock's 42.92% price total return over the past six months may indicate a resilient investor confidence despite recent market volatility.
For those looking to delve deeper into the financial health and future prospects of Red Rock Resorts, InvestingPro offers additional insights and analytics. Interested readers can explore these by visiting https://www.investing.com/pro/RRR and can benefit from a special offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 11 more InvestingPro Tips available, investors can equip themselves with a comprehensive toolkit for making informed decisions.
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