On Friday, Deutsche Bank downgraded Boyd Gaming (NYSE:BYD) to a Hold rating from a previous Buy status. The firm also lowered its price target for Boyd Gaming's shares to $71 from the prior target of $78.
The downgrade follows Boyd Gaming's release of a second consecutive quarterly report that did not meet expectations, marking a challenging first quarter in 2024. The company had previously enjoyed a multi-year streak of outperformance in the stock market. Despite recognizing Boyd Gaming as a strong value within the gaming sector, analysts at Deutsche Bank have found it difficult to pinpoint near-term growth catalysts, changes in property-level results, or potential events that could lead to a reassessment of the company's stock value.
Deutsche Bank's analysis suggests that EBITDA growth for Boyd Gaming may be difficult to achieve in the near future. The Las Vegas local market, where Boyd operates, has shown signs of slowing down. Additionally, regional gaming markets have been experiencing a year-over-year decline, and costs are on the rise. Historically, gaming companies have seldom seen their stock multiples increase in the face of declining EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent or Restructuring costs).
Boyd Gaming's first-quarter results for 2024 fell short of market forecasts, especially given the challenging conditions in January. Management did note some positive trends in February and March, particularly in core customer volumes and margins, and they spoke somewhat optimistically about April. However, despite these positive indicators, the January performance was worse than expected, and the analysts do not foresee a strong resurgence in consumer activity in the drive-to gaming markets in the short term.