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Boyd Gaming (BYD) Shares Rally 42% YTD: More Room To Run?

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Boyd Gaming Corporation (BYD - Free Report) is poised to benefit from interactive gaming platform, FanDuel partnership and local markets. This along with focus on expansion initiatives bodes well.

So far this year, shares of Boyd Gaming have surged 41.7% compared with the industry’s 0.5% growth. The price performance was backed by a solid earnings surprise history. Boyd Gaming’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters. Earnings estimates for 2021 and 2022 have moved up 37.3% and 23.1%, respectively, in the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Factors Driving Growth

Interactive Gaming to Drive Growth: Boyd Gaming has been witnessing solid performance by the interactive gaming platform. Thanks to the strategic partnership with FanDuel, the company is optimistic regarding its future in the iGaming industry. Meanwhile, the company has made solid progress with reference to its cashless digital wallet — BoydPay. So far, the company has rolled out BoydPay at five properties. It expects the same to go live in 21 properties by 2021-end subject to regulatory approvals. Going forward, the company plans to integrate the wallet into its online products, thereby expanding the services to additional amenities and Boyd Gaming properties. For 2021, the company expects EBITDAR from sports betting and interactive gaming to be more than $20 million.

Emphasis On FanDuel Partnership: During third-quarter 2019, the company partnered with FanDuel Group and opened sports books at Blue Chip, Belterra Resort, Diamond Jo Dubuque and Diamond Jo Worth properties in the Midwest. It also introduced a market-leading mobile app in Pennsylvania. Courtesy of its performance in Pennsylvania and New Jersey, FanDuel launched its mobile betting app in the state of Indiana. During the second quarter of 2020, the company expanded its partnership with FanDuel Group, which includes retail sports books at seven Boyd properties, mobile sports betting apps in Pennsylvania and Indiana as well as the online gaming site in Pennsylvania. During the third quarter of 2020, the company continued to expand its partnership with FanDuel Group, thereby launching mobile sports betting products in Illinois and Iowa. Going forward, the company is optimistic about online gaming prospects in Louisiana. It expects to launch FanDuel retail and mobile sports books in the state by 2021-end. Given a high promotional capital-intensive and competitive landscape, we believe that partnership with FanDuel is likely to drive positive cash flows in the upcoming periods. This along with legalization of sports betting in additional states is likely to add to the positives.

Local Markets a Driving Factor: Post coronavirus-induced shutdowns, increased traffic from local and regional customer base is likely to contribute to the company’s performance. Notably, the company considers the local market in Las Vegas as a major driver for its portfolios. With restaurants and bars open, frequent visitation of locals is likely to drive growth. During the second quarter, the segment witnessed heightened consumer confidence on the back of ramped-up vaccination drive and easing of capacity restrictions. The segment’s gaming revenues were up 6.9% from 2019 levels. During the quarter, the segments EBITDAR was up 87% from 2019 levels. Excluding closed properties in Orleans, EBITDAR was up 107% from 2019 levels.

Expansion Efforts: The company continues to expand its portfolio by strengthening current operations, growing through capital investments and other strategic measures. Currently, the company is working on Wilton Rancheria resorts, which is positioned as the closest Class 3 casino to Downtown Sacramento in the South Bay area. The company expects to open the property by the second half of 2022. The company is stated to have made substantial progress with reference to the construction of Sky River Casino site. The resort comprises 2,000 slot machines, 80 table games as well as 12 food and beverage offerings. With steel in ground and member recruitments underway, the company expects to open doors by fourth-quarter 2022. Moreover, the company is evaluating opportunities to reinvest in its existing operations from regional portfolio. To this end, the company initiated development plans for a land-based facility at Treasure Chest. The company expects the development to boost guest experience of this property.

Other Key Picks

Some other top-ranked stocks in the same space include Golden Entertainment, Inc. (GDEN - Free Report) , Red Rock Resorts, Inc. (RRR - Free Report) and Century Casinos, Inc. (CNTY - Free Report) . Golden Entertainment and Red Rock Resorts sport a Zacks Rank #1, while Century Casinos carries a Zacks Rank #2 (Buy).

Earnings for Golden Entertainment, Red Rock Resorts and Century Casinos in 2021 are likely to surge 226.4%, 151.2% and 137.3%, respectively.