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Red Rock Resorts (RRR) Stock Surges 62% YTD: Here's Why

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Red Rock Resorts, Inc. (RRR - Free Report) is benefiting from a host of initiatives including streamlining of operations, cost saving efforts, optimization of marketing initiatives, and renegotiating vendor and third-party agreements. Consequently, shares of this Zacks Rank #1 (Strong Buy) company have surged 62% year to date, compared with the industry’s growth of 9.7%.

Other stocks from the same space such as MGM Resorts International (MGM - Free Report) have gained 25.3%, while some like Las Vegas Sands Corp. (LVS - Free Report) and Corsair Gaming, Inc. (CRSR - Free Report) have declined 4.8% and 11.5%, respectively, so far this year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Drivers

Red Rock Resorts is witnessing robust visitation from a younger demographic. Moreover, the company announced that it is witnessing increased spend per visit and more time spent on device. The company is gaining from roll out of vaccine, easing of capacity restrictions from 25% to 50% on Mar 15, 2021, and federal stimulus money. It anticipates to return to 100% occupancy. The company also operated its first-to-reopen properties of Red Rock, Green Valley Ranch, Santa Fe Station, Boulder Station, Palace Station and Sunset Station and Wildfire Properties.

 

Cost saving efforts are also favoring the company. During first-quarter 2021, its performance benefited from streamlining of operations, optimization of marketing initiatives, and renegotiating vendor and third-party agreements. Backed by these initiatives, the company now anticipates to save more than $200 million in annual costs, up from the prior estimate of $150 million. Going forward, the initiatives are not only going to support efficient production but are also likely to drive margins and free cash flow.

Following favorable decision from the California Supreme Court (in third-quarter 2020), Red Rock Resorts increased its focus on the North Fork development project. Currently in planning and budgeting stage, the company expects to start the project by second-quarter 2021. The project is likely to cover 213,000 square feet in area comprising 100,000 square feet of casino space, 2,000 class three slots, 40 table games, two stand-alone restaurants and a food hall concept. Estimated duration for construction is anticipated between 15 months and 18 months. The cost of completion of this project excluding any financing costs is expected in the range of $350 million to $400 million.

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