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- Analyst says real estate holdings offer “transformative upside”
- He says Golden Entertainment stock is inexpensive relative to peers
The stock has lost nearly 30% of its value this year, but Golden Entertainment (NASDAQ: GDEN) is inexpensive relative to its peers and controls real estate that, if divested, could generate significant upside for the shares.
Golden Entertainment’s corporate logo. An analyst says the stock is cheap and could be boosted by a real estate transaction. (Image: PR Newswire)Those are the takes of Texas Capital analyst David Bain, who in a report out Monday, slightly trimmed his third-quarter and full-year earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates on The Strat operator. He did, however, reiterate a “buy” rating and $39 price target on the stock, implying upside of about 77% from current levels.
We believe GDEN’s Nevada-centric, Strip and Locals segmented portfolio captures greater long-term growth potential than geographically-disperse regional peers. Further, GDEN’s low leverage, visible cash flow, and real estate holdings offer transformative stock upside optionality,” observes Bain.
Golden operates casinos in Las Vegas, Laughlin, and Pahrump, but with more than 70 gaming taverns in Nevada, the bulk of which are strewn across the Las Vegas Valley, the operator is tethered to the Las Vegas locals’ growth story.
Golden Entertainment Real Estate Could Propel Stock
Golden’s property holdings, particularly the real estate associated with The Strat and nine acres of unused land across from that casino hotel, have long been discussed as avenues for unlocking shareholder value.
Full ownership of the real estate on which its casinos reside, and that unused land near the Las Vegas Strip, are likely among the reasons Golden Entertainment stock has caught the eyes of some well-known investors, including one who recently turned activist.
Bain isn’t off-base in arguing that Golden doing something with its property holdings could be “transformative” for the stock because the company’s current market capitalization of $576.53 million likely doesn’t reflect the value of its real estate. It’s possible the operator could sell the aforementioned nine acres and The Strat’s real estate, and the gross proceeds would be close to or in excess of double its market value.
The rub is that if the operator engages in a sale-leaseback involving The Strat, it would be taking on a long-term liability in the form of rent payments in exchange for up-front cash.
Golden Shareholder Rewards Support Case for Stock
As Bain points out, Golden Entertainment stock is inexpensive relative to rivals, trading at an estimated 20% discount to its peer group based on 2026 enterprise value/EBITDA forecasts.
That discount may be further confirmation that the investment community isn’t adequately pricing the operator’s property assets into the stock price, and that market participants aren’t fully appreciating Golden’s low leverage and strong balance sheet, the latter of which supports shareholder rewards.
“GDEN’s ~4% dividend yield couples with share repurchases that eliminated 14% of its free float outstanding last year, paying investors to wait for potential valuation re-rating, earnings outperformance and/or transformative upside event,” concludes Bain.
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