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Buy the Dip on Bally's as Huge New Moves are Planned

Buy the Dip on Ballys as Huge New Moves are Planned

Bally's (NYSE:BALY) has been hit hard by the coronavirus and the various government restrictions placed on casino gaming and racetrack operations therein. Recently, however, the company sent news our way about moves it was making to help bring the company back to prominence. Though the company was down nearly 5% in premarket trading, what the company tipped us to is enough to make anyone consider getting in on a stock poised for recovery.

A Skein of New Measures

Bally's may have lost ground in recent trading, but it's been making its way back from the lower points it had been sitting in throughout 2020 and the worst of the coronavirus restrictions. It stepped into one major new move forward with the acquisition of the Tropicana Las Vegas, purchased from Gaming & Leisure Properties Inc (NASDAQ:GLPI), a publicly-traded real estate investment trust (REIT) that specializes in gaming. Bally's expects the total cost of the move to be around $308 million, and will serve as the first Las Vegas asset Bally's has with large-scale online gaming exposure.

Further, Bally's also combined with Gamesys Group (LON:GYS), which will give Bally's further access to online gaming, a market which has been rapidly gaining ground in the United States thanks to several state legislatures opening up access to operations like DraftKings (NASDAQ:DKNG).

Additionally, Bally's has already begun offering two separate public offerings, including $600 million in common stock and $250 million in tangible equity units, which will serve to fund the cash payment required to make the earlier-noted combination of Bally's and Gamesys happen.

Just to round it out, the company then announced its preliminary financial results for the recently-concluded first quarter, revealing revenue that was up substantially from the same time last year. The company reported consolidated revenue of just over $185 million, with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of over $50 million. This compares nicely to the results from the first quarter of 2019, where the company had $109.1 million in revenue and earnings of $22.1 million.

The Analysts are All In

While Bally's expresses the belief that its earnings numbers poise it for a strong 2021—when comparing it to any part of 2020, that's not so difficult—the analyst pool, based on our latest research, seems pretty enthusiastic about Bally's chances itself.

Analysis on Bally's doesn't go back far, but it does show very positive results. Back in January, the company had two “buy” ratings on it. In March, that increased to three “buy” ratings, which is where we sit today.

Price targets, meanwhile, have been rising significantly in recent days throughout most of the quarter. It started with Macquarie hiking from $52 to $61, and then Truist kicked in in February, going from $65 to $80. Stifel Nicolaus was the booster for March, going from $70 to $75, and then a little under a week ago, KeyCorp joined in going from $65 to $70.

Playing Both Sides of the Board

Granted, Bally's has not had particularly great results in the most recent trading. The release of all that new stock likely didn't help much; dilution of share value is seldom taken well by investors, so when a big new issue of stock comes out, it's often met with a bit of selling.

However, with what Bally's has revealed via this latest news blast looks like the key to a great new way forward. It's advanced a position in brick-and-mortar gaming, which is great as the coronavirus restrictions are slipping away thanks to rapid new gains in vaccinations. Not as rapid as some may like, of course, but certainly there, and certainly improving by the day. It's also making a move to improve its position in online gaming, which not only makes an excellent fallback position in the event of further coronavirus-related shutdowns, but also makes for an excellent complement to in-person gaming.

This combination of improvements looks like a recipe for advancing revenue and earnings, which should bode well for the company going forward. It's not going to be immediate, of course; these things have to actually be put in place and get fully up to speed before they start showing their true potential. However, having them in place is the first step—and probably the best step—to future gains. Anyone looking for more exposure to the gaming market in general may want to consider Bally's, especially after its recent dip.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Bally's (BALY)$58.27flatN/A-135.51Buy$70.40
DraftKings (DKNG)$48.42flatN/AN/ABuy$68.79
Gaming and Leisure Properties (GLPI)$47.11flat5.52%22.65Buy$47.85