Churchill Downs Incorporated (CHDN), the renowned gaming and entertainment company, has garnered significant attention from Wall Street analysts and investors alike. With a portfolio of iconic assets, including the namesake racetrack that hosts the prestigious Kentucky Derby, the operator is strategically positioning itself for substantial growth.
Despite lacking a physical presence in the lucrative Las Vegas market, CHDN’s stock is primed for an upside. The positive news presents an attractive opportunity for investors seeking exposure to the expanding US gaming industry.
CHDN’s shares closed day trading with a slight increase, reaching almost $120 per share, following the release of their impressive Q4 2023 results late last month. However, now that these figures are behind us, analysts are shifting their focus towards the operator’s recently established venues and the potential influence they may exert on the stock’s value.
This especially true as the gaming operator is poised to open a series of new racetrack venues, including Owensboro Racing & Gaming in Owensboro, Kentucky and The Rose Gaming Resort in Dumfries, Virginia. The news comes over a year after DraftKings and CHDN partnered to launch an online horse racing product.
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Bullish Outlook from Wall Street
Wall Street analysts have painted an optimistic picture for Churchill Downs, with several firms issuing bullish ratings and price targets for the company’s stock. According to recent reports, analysts at Susquehanna International Group have reiterated a Positive rating and a $275 price target, reflecting a potential upside of nearly 20% from current levels.
The firm’s analysts cited Churchill Downs’ strong performance in the fourth quarter of 2023, driven by robust visitation and revenue growth across its portfolio of gaming properties. Based on the 8-K filings of the company as reported by Yahoo Finance, Churchill Downs saw a record net revenue of $2.5 billion in 2023, reflecting a 36% rise from the prior year.
At the same time, the company paid out dividends at $0.382 a share, meaning its dividend payments have increased for 13 years in a row. The company’s profits reached a record $1 billion last year, marking an uptick of 34% from 2022.
Expansion Plans Fuel Growth Potential
Wall Street analysts remain overwhelmingly bullish on CHDN’s prospects. As of publishing, eight out of ten analysts covering the stock rate it as a ‘strong buy’ or ‘buy,’ indicating their strong belief in its potential for upward movement.
The consensus price target for CHDN sits at $143, which translates to a potential upside of 19.31% from its current trading price. This positive sentiment from analysts further underscores the investor confidence surrounding the company.
One of the primary drivers of CHDN’s stock appreciation is its robust expansion strategy. In fact, most analysts giving the firm bullish outlook highlighted its strategic initiatives, including the expansion of its historical racing machine (HRM) operations and the development of new gaming and entertainment venues.
The company is actively pursuing the development of new historical horse racing facilities across the United States. These facilities, which allow patrons to wager on previously recorded horse races, have emerged as a significant revenue stream for the company.
The success of its existing HHR operations, coupled with the planned expansion, is expected to contribute significantly to CHDN’s future growth. Further bolstering its position in the market, CHDN has made strategic acquisitions in recent times.
In August 2023, Churchill Downs completed its acquisition of Exacta Systems in a $250 million buyout deal, according to Global Wire. The company has also made several purchases of Play-to-Earn (P2E) technologies, including half a dozen Rosie’s Gaming Emporium locations and Colonial Downs Racetrack in New Kent, Virginia.
These acquisitions are viewed favorably by analysts, who believe they will contribute positively to CHDN’s long-term financial performance.
TwinSpires Unit Drives Online Success
Beyond its brick-and-mortar operations, CHDN has also experienced considerable success in the online gaming segment. Its TwinSpires online sports betting and horseracing platform has emerged as a leading player in the market, attracting a significant customer base and contributing substantially to the company’s overall revenue.
The operator shut down its TwinSpire sportsbook and iGaming platform in New Jersey two years ago, a few months after being rebranded from BetAmerica. Despite this, the continued growth of TwinSpires in other states is expected to remain a key driver of CHDN’s future success.
Expansion and Diversification Fueling Growth
One of the key drivers of Churchill Downs’ growth trajectory is its commitment to expanding and diversifying its operations. The company has been actively pursuing opportunities to establish a footprint in new markets, leveraging its expertise in gaming, racing, and entertainment.
Notably, Churchill Downs has made significant strides in the development of new venues, including the highly anticipated Rose Gaming Resort in Dumfries, Virginia. This $550 million project is expected to be a game-changer for the company, offering more than 650 HRMs.
Furthermore, the company has recently unveiled plans for a $76.5 million investment in a new HRM facility in Mercer County, Ohio. This move not only expands Churchill Downs’ HRM footprint but also positions the company to capitalize on the growing demand for alternative gaming options in the region.
The company’s acquisition of Terre Haute Casino Resort in Indiana, which includes a hotel slated to open in May, is expected to be a significant revenue driver. The timing of the hotel’s opening coincides with the prestigious Kentucky Derby, one of Churchill Downs’ marquee events, potentially creating synergies and driving increased visitation to the property.
Wrapping Up
Despite these challenges, Churchill Downs Incorporated appears well-positioned for continued growth. Its ongoing expansion plans, strategic acquisitions, and success in the HHR and online gaming markets position the company for a promising future. With strong analyst support and a clear path for growth, CHDN’s stock remains an attractive option for investors seeking exposure to the growing gaming industry.
