Barclays has revised its price target for Churchill Downs (CHDN, Financial), reducing it slightly from $125 to $124. Despite this adjustment, the financial institution maintains an Overweight rating on the company's stock, signaling ongoing confidence in its long-term prospects.
The decision comes as Churchill Downs faces headwinds from broader economic conditions, which have disrupted the momentum expected from its signature Derby 151 event. Additionally, the company is dealing with the most challenging comparative figures in Derby history, further complicating its near-term outlook.
Nonetheless, analysts at Barclays anticipate a return to consistent growth for Churchill Downs by 2026. The firm regards Churchill Downs as a distinctly robust growth entity in the gaming sector, suggesting its potential for resilience and recovery despite current challenges.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 12 analysts, the average target price for Churchill Downs Inc (CHDN, Financial) is $145.20 with a high estimate of $172.00 and a low estimate of $124.00. The average target implies an upside of 65.02% from the current price of $87.99. More detailed estimate data can be found on the Churchill Downs Inc (CHDN) Forecast page.
Based on the consensus recommendation from 12 brokerage firms, Churchill Downs Inc's (CHDN, Financial) average brokerage recommendation is currently 1.8, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Churchill Downs Inc (CHDN, Financial) in one year is $173.32, suggesting a upside of 96.98% from the current price of $87.99. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Churchill Downs Inc (CHDN) Summary page.
CHDN Key Business Developments
Release Date: February 20, 2025
- Net Revenue: Record net revenue, up 11% over 2023.
- Adjusted EBITDA: Record adjusted EBITDA, up 13% over 2023.
- Virginia HRM Venues Contribution: 20% of nearly $1.2 billion adjusted EBITDA in 2024.
- Free Cash Flow: $688 million or $9.22 per share, up nearly 33% per share over the prior year.
- Maintenance Capital Expenditure: $84 million in 2024; expected $100 million to $110 million in 2025.
- Project Capital Expenditure: $463 million in 2024; expected $350 million to $400 million in 2025.
- Share Repurchases and Dividends: Over $218 million returned to shareholders in 2024.
- Bank Covenant Net Leverage: 4.0 times at the end of December 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Churchill Downs Inc (CHDN, Financial) achieved record net revenue and adjusted EBITDA in 2024, with an 11% and 13% increase respectively over 2023.
- The company successfully opened major projects like the Terre Haute casino resort and the Rose gaming resort, which are expected to drive growth in the coming years.
- The Kentucky Derby continues to be a significant asset, with ongoing investments in infrastructure and hospitality expected to enhance the guest experience and drive future revenue.
- CHDN's HRM venues in Virginia contributed significantly to the company's financial performance, accounting for 20% of the nearly $1.2 billion adjusted EBITDA in 2024.
- The company maintains a strong balance sheet, allowing for continued investment in growth opportunities while returning capital to shareholders through share repurchases and dividends.
Negative Points
- The introduction of new projects and expansions, such as the Starting Gate Courtyard and Pavilion, may pose risks of construction disruptions, although the company aims to minimize these impacts.
- The Rose gaming resort in Virginia is still in its early stages, requiring significant marketing investment to educate the market and attract customers.
- CHDN faces challenges from gray market gaming, which continues to impact revenue despite progress in enforcement in states like Kentucky and Virginia.
- The regional gaming market shows signs of maturity in certain areas, which may limit growth opportunities compared to other segments like HRMs and the Kentucky Derby.
- The company is exposed to potential economic headwinds, such as inflation and wage growth, which could impact consumer spending and operational costs.
