Wells Fargo Starts Golden Entertainment (GDEN) at Overweight

Wells Fargo analyst Zachary Silverberg initiates coverage on Golden Entertainment (NASDAQ: GDEN) with a Overweight rating and a price target of $38.00.

The analyst said: "Balance Sheet Provides Optionality. GDEN's strong balance sheet (2x net leverage), real estate ownership, and M&A track record offer attractive optionality. Sale/leaseback: we est. GDEN could generate ~$1.1b of gross proceeds, similar to its current $1.2b EV. This would value GDEN at a low-to-mid $40/share, or 20-30% upside. Buybacks remain a priority, with GDEN repurchasing ~6% of S/O 2024YTD. Land sales: We estimate GDEN's land (mainly acreage near STRAT) could be worth $80m or $3+ per share. Following a challenging '24, we think fundamentals should stabilize in '25. While we lean cautious on the STRAT's midweek occupancy recovery (-15pts vs. '19 levels), we think midweek occupancy should be stable given Tropicana/Mirage closing, Atomic Golf ramping, and better convention attendance in '25. We expect Locals and Taverns to be stable too, with improving average weekly earnings and slot handle growth following y/y declines in '24, plus potential margin lift as we lap labor pressure. Valuation is Attractive. GDEN trades at 7.6x '25E and 6.9x '26E EV/EBITDA, a discount vs its historical 1-yr fwd ~9x and vs regional peers' ~8.3x. Our $38 PT assumes GDEN can trade at an 8% 2025E FCF yield, right in line with where BYD currently trades. We note the two companies are similar, with both having stable fundamentals, strong balance sheets (net leverage <3x), and real estate ownership/optionality. Given its lower levg/int. exp., GDEN has a higher FCF conversion of 55% vs BYD's 40%."

For an analyst ratings summary and ratings history on Golden Entertainment click here. For more ratings news on Golden Entertainment click here.

Shares of Golden Entertainment closed at $33.19 yesterday.

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