Boyd Gaming's Recent Moves and Future Potential Unveiled
Boyd Gaming's Stock Performance Insights
Boyd Gaming (NYSE: BYD) has seen an impressive rise in its stock price, which climbed over 3% recently. This surge can be attributed to Boyd's strategic decision to sell its stake in FanDuel, a leading player in online sports betting.
In an announcement made last week, Boyd confirmed that it was divesting its 5% ownership in FanDuel to Flutter Entertainment (NYSE: FLUT), the parent company of FanDuel. The transaction is valued at an impressive $1.755 billion and is expected to close in the third quarter.
The capital generated from this sale primarily aims to reduce Boyd's current debt levels of around $3.5 billion, positioning the company for a much stronger financial future.
Keith Smith, the President and CEO of Boyd, expressed optimism about this decision, noting how this move would unlock significant unrealized value from their investment in FanDuel. Smith emphasized that Boyd will now be in a better place to invest in its properties, pursue growth, return capital to shareholders, and sustain a robust balance sheet.
Boyd's partnership with FanDuel has been pivotal in driving substantial revenue growth. In the first quarter, Boyd's online segment saw revenue soar by 16%, reaching approximately $170 million. Smith remarked during the recent earnings call that the partnership had unlocked significant value for shareholders as FanDuel continues to fortify its position as a premier online gaming entity.
New Agreement with FanDuel
Alongside the stake sale, Boyd has secured a new market-access agreement with FanDuel, effective through 2038. This agreement entails Boyd receiving a fixed fee for each state where it operates casinos, including locations such as Iowa, Indiana, Kansas, Louisiana, and Pennsylvania.
FanDuel will also manage Boyd's retail sportsbooks outside of Nevada until mid-2026, after which Boyd will take over operations. Furthermore, Boyd will maintain its own sports betting app within Nevada, ensuring continued brand presence and user engagement in this vital market.
Post-transaction, Boyd anticipates its online segment will yield operating income between $50 million and $55 million for the full year 2025, with an estimated $30 million for 2026.
Smith praised FanDuel's dominance in the online sports betting industry and acknowledged the fruitful collaboration that has enabled Boyd to profitably engage in the fast-evolving sports betting landscape.
Analysts Adjust Price Targets for Boyd
The stock price reacted positively after the announcement, partially driven by several upgrades from analysts. Morgan Stanley increased its price target for Boyd from $76 to $80, suggesting that the value of the acquired assets might temporarily elevate U.S. gaming asset valuations.
Stifel and Susquehanna also raised their price targets for Boyd to $87, affirming their confidence in the stock's potential. Susquehanna analysts pointed out that by utilizing the proceeds to reduce debt, Boyd could save up to $85 million in interest expenses annually.
Currently trading at around $82.35 per share, Boyd has a median price target of $85, indicating a possible 3% return in the next year. The enhanced target from some analysts reflects a potential growth trajectory of 6%.
While Boyd appears attractively priced with a trading ratio of 13 times earnings and 11 times forward earnings, investors should remain cautious ahead of Boyd's Q2 earnings report scheduled for July 24. This upcoming report could offer additional insights into the company's financial health.
Frequently Asked Questions
What recent deal did Boyd Gaming finalize?
Boyd Gaming agreed to sell its 5% stake in FanDuel to Flutter Entertainment for $1.755 billion.
How will the proceeds from the sale benefit Boyd Gaming?
The funds will primarily be used to reduce Boyd's existing debt of $3.5 billion.
What is the expected operating income for Boyd's online segment?
Post-deal, Boyd anticipates its online segment will generate between $50 million and $55 million in operating income for the year 2025.
What is the new price target set by analysts for Boyd Gaming?
Several analysts raised their price targets for Boyd Gaming, with the highest now being $87 per share.
When is Boyd Gaming's next earnings report due?
Boyd Gaming is scheduled to release its Q2 earnings report on July 24.
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