By Sam Boughedda
Red Rock Resorts (NASDAQ:) was initiated with a Buy rating and $50 per share price target at Jefferies on Wednesday.
An analyst investors in a note that the hotel and casino company presents a “compelling growth story,” with “valuable real estate assets strategically located across a booming area of Las Vegas.”
“At the current rate of investment, we think RRR’s EBITDA could grow by 70% over the next decade. Although time risk and macro uncertainties persist, the company’s balance sheet has largely been derisked, allowing it to grow one step at a time while simultaneously returning capital to shareholders,” explained the analyst.
She described the company as a “pioneer” at its inception, adding that it has dominated the Las Vegas Locals market.
“Today it owns and operates six large casino resorts and intends to double that count by 2030. Durango, the first in the pipeline, is scheduled to open by the fall of 2023 and generate $140M of incremental EBITDA by 2026. With 77% of the budget locked in today, the risk of cost overrun is mitigated. Given a base FCF of >$400M, we expect RRR to self-fund these projects and keep leverage below 4X. At the same time, shareholder returns should continue,” she wrote.
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