Goldman Sachs Downgrades Boyd Gaming (BYD) to Sell; NJ Online Gaming Opportunity Smaller, Will Take Longer

February 12, 2013 7:26 AM EST
Get Alerts BYD Hot Sheet
Price: $19.47 +0.41%

Rating Summary:
    10 Buy, 14 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Goldman Sachs downgraded Boyd Gaming (NYSE: BYD) from Neutral to Sell with a price target of $5.50, suggesting 26% downside.

The firm notes shares of Boyd are trading at 7.5X 2013E EBITDA, or only a slight discount to its long-term historical average of 8.0X. This despite a more challenged business now than it was in the past.

Shares of Boyd are up 8% over the past last three days, likely on the expectation of legalized online gambling in New Jersey. "While we think online gambling could ultimately be big, we expect it could take longer than expected to roll out and will be very competitive, with high promotional activity, which in turn could lead to lower than-expected margins."

Goldman sees three main catalysts for selling the stock: regional gaming markets remain to the long-term secular challenges of increased cannibalization; 2. New Jersey online gaming opportunity is much less than expected and will take longer to realize; 3. Boyd's leveraged balance sheet makes a REIT conversion or M&A unlikely.

For an analyst ratings summary and ratings history on Boyd Gaming click here. For more ratings news on Boyd Gaming click here.

Shares of Boyd Gaming closed at $7.48 yesterday.

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