Red Rock Resorts, Inc. (RRR – Free Report) is likely to benefit from cost reduction initiatives, Las Vegas operations and digitization initiatives. This, along with the focus on development projects, bodes well. In the past six months, the stock has gained 20% from the industry’s 18.6% decline. However, an increase in COVID mitigation and transportation costs is a concern.
Let’s take a closer look at the factors as to why investors should hold onto the stock for now.
Red Rock Resorts continues to focus on initiatives, such as streamlining operations, optimizing marketing initiatives and renegotiating agreements with suppliers and third parties to drive growth. The initiatives will not only support efficient production, but are also likely to generate margins and free cash flow. Supported by these initiatives, the company expects to save more than $ 200 million in annual costs (relative to its pre-pandemic cost structure) over the coming periods.
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The company’s Las Vegas operations have been a key growth driver in recent quarters and the trend is expected to continue in the coming quarters. The company is optimistic for the long term due to favorable supply-demand dynamics, positive long-term trends in population growth and a stable regulatory environment. Attributes such as premier assets and locations, unprecedented distribution and scale, and a strong organic development pipeline are likely to drive the business forward.
Red Rock Resorts continues to make substantial progress when it comes to cashless gaming. In the third quarter of 2021, the company launched field trials with IGT (at Red Rock and Green Valley branches) to introduce cashless payments to the slot machine floor. Red Rock Resorts intends to offer single access to the mobile digital wallet for gaming and payment purposes at each of its Las Vegas properties. Apart from this, the company has entered into a partnership with GAN Limited (in October 2021) to build and deploy the next generation infrastructure stations, the online sports platform STN Sports, mobile applications and sports betting in over-the-counter and at newsstands throughout Nevada. The company said the product launch is subject to regulatory approvals.
Following a favorable decision by the California Supreme Court (in August 2020), Red Rock Resorts has focused more on the North Fork development project. The cost of completing this project, excluding financing costs, is expected to be between $ 350 million and $ 400 million. The company said the project is currently in the planning and budgeting stage. In addition, he focused on the Durango development project. Located off of Highway 215 and Durango Drive in the southwestern Las Vegas Valley, the project is expected to offer 73,000 square feet of casino space, 2,000 slot machines and 40 table games, a State-of-the-art sports betting site, 200 hotel rooms and four full-service food and beverage outlets. Currently in the planning and budgeting stage, the company plans to start the project by the first quarter of 2022. It is bullish on this development pipeline due to the location as well as the lack of gaming competitors. unrestricted (within 5 miles of the project site).
The gaming industry is currently grappling with the coronavirus pandemic and Red Rock Resorts is not immune to the trend. While the company is seeing an increase in visits from the younger population, this is largely offset by higher COVID mitigation costs (nearly $ 2.4 million) and transportation costs associated with its properties closed (approximately $ 2.6 million) in the third quarter of 2021. The unprecedented nature of the crisis is likely to affect the company’s future results.
Rank of Zacks and actions to consider
Currently, Red Rock Resorts carries a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 (strong buy) stocks today here.
Some top-ranked stocks in Zacks’ consumer discretionary sector include Churchill Downs Incorporated (CHDN – Free report), Bluegreen Vacations Holding Corporation (BVH – Free report) and Century Casinos, Inc. (CNTY – Free report).
Churchill Downs sports a Rank 1 of Zacks (strong buy). The company has a surprise earnings for the last four quarters of 13.7% on average. The company’s shares have risen 21.4% so far this year.
Zacks’ consensus estimate for Churchill Downs sales and earnings per share (EPS) for the current year suggests growth of 51.4% and 684.3%, respectively, from levels in the last year.
Bluegreen Vacations has a Zacks # 1 ranking. The company has a surprise earnings for the last four quarters of 695%, on average. The company’s shares have jumped 159.7% so far this year.
Zacks ‘consensus estimate for Bluegreen Vacations’ sales and EPS for the current year shows growth of 27.5% and 199.3%, respectively, from the prior year levels.
Century Casinos carries a Zacks Rank # 2 (Buy). The company has a surprise earnings for the last four quarters of 758.9% on average. The company’s shares have risen 99.4% so far this year.
Zacks ‘consensus estimate for Century Casinos’ current year sales and EPS suggests growth of 26.9% and 146.6%, respectively, from a year ago levels.