On Monday, JPMorgan (NYSE:JPM) revised its stock price target for Red Rock Resorts (NASDAQ:RRR), reducing it to $63 from the previous $69 while retaining an Overweight rating on the stock. This adjustment follows a reassessment of the company's forecasts for the years 2024 and 2025.
The decision to lower the target price is influenced by the first quarter performance of Boyd Gaming (NYSE:BYD)'s Las Vegas Locals segment, which has faced challenges such as increased competition and consumer softness in certain retail and lower-end markets. JPMorgan has consequently reduced its EBITDA estimates for Red Rock Resorts by 3% for 2024 and 2% for 2025.
Despite the revised forecasts, JPMorgan does not perceive any risk to the anticipated EBITDA contribution from Red Rock's Durango project and maintains its view on the potential for property cannibalization. The firm's stance remains that there is no change in the risk assessment for the higher-end properties of Red Rock Resorts.
Still, the firm acknowledges that there might be some risk associated with Red Rock Resorts' non-higher-end properties. These properties, which represent a smaller percentage of total revenue compared to Boyd Gaming's, could be vulnerable to a slowdown in consumer spending among locals.
The reassessment and subsequent price target reduction come after Red Rock Resorts' shares experienced a 9% decline on Friday. This drop was a reaction to Boyd Gaming's quarterly results and its commentary on the Las Vegas Locals market, which highlighted some of the pressures currently faced by the sector.
InvestingPro Insights
In light of JPMorgan's revised price target for Red Rock Resorts, it is worth considering additional metrics and insights from InvestingPro. The company's market capitalization stands at $5.79 billion, and it is trading at a Price/Earnings (P/E) ratio of 17.92, which adjusts to 16.92 when looking at the last twelve months as of Q4 2023.
This suggests a moderately valued stock relative to earnings. The revenue growth for the same period shows a healthy increase of 3.62%, with a more robust quarterly growth of 8.75% in Q4 2023.
One of the notable InvestingPro Tips is Red Rock Resorts' impressive gross profit margin, which has reached 63.67% over the last twelve months as of Q4 2023. This high margin is indicative of the company's strong pricing power and cost management.
Moreover, analysts have revised their earnings upwards for the upcoming period, reflecting optimism about the company's future profitability. It is also worth noting that Red Rock Resorts has maintained dividend payments for 9 consecutive years, with a dividend yield of 3.7% as of the most recent data.
With these insights, investors can better gauge the opportunities and risks associated with Red Rock Resorts. For those interested in further in-depth analysis, there are additional InvestingPro Tips available. By using the coupon code PRONEWS24, readers can access these valuable insights with an extra 10% off on a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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