Churchill Downs Stock Poised for Rebound Despite Initial Slump, Forecasts Analyst


Churchill Downs Incorporated, a recognized name in the gaming universe and prime mover on the NASDAQ market (CHDN), has witnessed their shares dip by a third of a percent since the start of the year. However, surprisingly enough, their performance could still be nominated as one of the foremost among the gaming market. An analyst suggests this waning tide could soon turn around.

Positioned in the heart of Louisville, Churchill Downs’ Derby City Gaming venue has had a historically slow twitch to the start of the horse racing season. But this sluggish prologue has not dampened the overall bullish attitude towards the stock.

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Stifel analyst Jeffrey Stantial, in a recent communication to his clients, argued that Churchill Downs was an abundant well of opportunity, with the promising potential to de-leverage and expand. A “$153 price target” for the shares and a prospective upside of 13.7% from the closing figure on June 7th, was something that Stantial strongly espoused. In retrospect, the Churchill Downs operator had previously set a new yardstick for the handle at the Kentucky Derby and Derby Week in the previous month. This was likely to counterweight the results of the second quarter.

A new, extended partnership, announced concurrently with a broadcast rights’ agreement with NBC Sports was the highlight of the manager’s review. This, along with a strong growth in viewership (+13% Y/Y) and various developmental projects are key factors that substantiate CHDN’s targeted sponsorship strategy. Similarly, the Paddock project, costing around $200 million, received an overwhelmingly positive response. In turn, management reasserted its opportunity to optimize and yield the given spaces in future years (2025+).

There was cheering news for Churchill’s TwinSpires unit as well. The online betting division seized “the run for the roses,” with a handle of $92.1, setting yet another record that easily surpassed the former breakthrough of $75.5 million notched up last year.

However, the haltering beginning of the $90 million Derby City Gaming venue in Louisville did trigger some alarm bells. Yet, Stantial insists that Kentucky and Virginia hold significant relevance in the broader schema of the Churchill Downs stock hypothesis. While the Historical Racing Machines are making quiet progress in Virginia under the Rosies brand, Churchill Downs’ position in the state has seen a boost thanks to Virginia’s prohibition of skill games.

Despite the initial sluggish moves by Derby City, Stantial affirmed that the Churchill Downs management sees present stability in the trendline of the same-store sales across its Kentucky gaming venues.

Beyond the fluctuating tides of the stock market, the savvy deal-making of Churchill Downs, particularly the pivotal acquisition of Exacta Systems for a whopping $250 million in December 2022, has shown promising results. The Florida-based provider of HRM systems and gaming machines has notably increased Churchill’s presence in the HHR sector in its home state, Virginia, as well as New Hampshire. This has contributed to growth in multiple dimensions.

Although still in nascent stages, the management is enthusiastic about the untapped potential of the international HHR growth, alluding to the upcoming opportunities through their partnership with Exacta.