Century Casinos Stock May Have Fallen Too Far Too Fast

Posted on: February 27, 2024, 12:23h. 

Last updated on: February 27, 2024, 12:35h.

It could take a while for Century Casinos (NASDAQ: CNTY) to reclaim lost glory but the sell-off that’s seen the stock shed more than two-thirds of its value over the past year is too punitive.

Century Casinos
The Century Casino in Caruthersville, Mo. The operator’s stock has been drubbed, but has rebound potential. (Image: KFVS12)

That’s the take of Stifel analyst Jeffrey Stantial, who in a new report to clients, reiterated a “buy” rating and a $5 price target on shares of the regional casino operator. That forecast implies upside of 81.1% from the February 26 close. Stantial recently met with Century Co-CEO & Vice Chairman Peter Hoetzinger, noting several important takeaways.

Management is evaluating options to address/exploit perceived dislocation in valuation and completion of a license renewal cycle in Poland should help a potential sale,” observed the analyst.

Colorado-based Century owns about two-thirds of Casinos Poland, and it’s been more than three years since the company said it was looking to divest that stake. That effort was delayed by Russia’s invasion of Ukraine in February 2022.

Century Casinos Stock Selloff Overdone

Down 40.37% year to date and nearly 70% removed from its 52-week high, Century has been one of the worst-performing casino stocks dating back to mid-2023.

Some of that slump is attributable to increased competition in Reno and a slower-than-expected ramp-up period in Maryland, the operator’s two newest markets. However, a case can be made that selling pressure on the stock is excessive.

“While acknowledging underlying fundamental headwinds, we believe recent underperformance & fears of financial distress are excessive and discount tapering one-time headwinds & return on growth capex. Normalized earnings power won’t be evident until FY25, though buybacks/insider purchases may help support sentiment/valuation more near-term,” added Stantial.

Century’s fundamentals could be boosted in the second half of this year as improvements take shape at its two Missouri gaming venues and the operator capitalizes on synergies at Nugget Sparks in Reno. The operator’s enhancements at its pair of Missouri casinos could aid in gaining more traction with mid- to higher-tier clients.

Some Century Casinos Headwinds are Temporary

Century recently pre-announced fourth-quarter results that missed Wall Street forecasts but the silver lining is that the downbeat numbers were largely attributable to temporary situations, namely construction at its Missouri casinos and at Nugget Sparks.

As investors realize those situations aren’t permanent — and that with a market value of $88.35 million, Century is being priced by market participants well below the sum of its parts — the stock could generate some near-term upside.

“Putting it all together, commentary throughout meetings attended suggests potentially more pronounced structural headwinds for CNTY vs. some regional peers,” concluded Stantial. “Still, this appears excessively discounted in CNTY’s current valuation, with much of the FY24 Consensus revisions attributable to one-time headwinds. While normalized earnings power won’t be evident until FY25, we see some more near-term catalysts for a potential relief rally.”

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