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Bear of the Day: Golden Entertainment, Inc. (GDEN)

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Golden Entertainment (GDEN - Free Report) shares have been in a downward trend for two years, and then the coronavirus forced its casinos and neighborhood bars to close. The U.S. economy is starting to return to something close to normal, but Golden’s outlook remains rough.

What’s Going On?

Golden Entertainment owns ten total casino resorts, most of which are in Nevada. GDEN is also one of the largest distributed gaming operators in the U.S., running “more than 10,500 gaming devices across Nevada and Montana." On top of that, the company’s portfolio includes 60 neighborhood pubs and taverns across Nevada.

Golden’s top-line had grown at a solid pace over the last several years, as it expanded its reach. Unfortunately, Wall Street’s admiration didn’t follow as its bottom-line performance underwhelmed. And now its core business has taken a massive hit as the coronavirus forced businesses deemed non-essential to close all over the country starting in mid-March. Things have started to return to normal and many restaurants and casinos have slowly reopened their doors in some capacity. However, coronavirus cases continue to spike in parts of the U.S.    

GDEN’s Q1 fiscal 2020 sales fell nearly 14% for the period ended on March 31, which only included a few weeks of the shutdown. The company also reported a far worse-than-projected adjusted quarterly loss. This marked its fourth straight bottom-line miss and its fourth straight adjusted loss. “The COVID-19 pandemic forced the mandated closure of all our operations beginning in mid-March, and continues to have an unprecedented impact on our business and the gaming and entertainment industry in general,” CEO Blake Sartini said in prepared remarks.

 

 

 

 

 

 

 

 

 

 

Outlook

Clearly, the pandemic is totally out of Golden’s control. Nonetheless, the company’s second quarter sales are projected to plummet 79%, or nearly $200 million from the year-ago period to $53.2 million, based on our Zacks estimates. GDEN’s Q3 sales are then expected to sink 38% to push its full-year fiscal 2020 revenue down by over 38%.

On the bottom end of the income statement, Golden is expected to plummet from an adjusted loss of -$0.10 a share in Q2 FY19 all the way to -$1.90 this quarter. And its fiscal 2020 EPS figure is projected to sink to -$5.04 from last year’s -$1.43.

 

 

 

 

 

 

 

 

 

 

Bottom Line

The nearby chart shows investors just how much worse Golden’s earnings outlook as turned recently, due to no fault of its own. Still, GDEN is currently a Zacks Rank #5 (Strong Sell). And investors thinking about taking a chance on beaten-down casino and entertainment stocks might want to wait to see how the next few weeks play out.

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