Golden Entertainment (GDEN) PT Raised to $34 at Jefferies as Trends Continue to Improve

Jefferies analyst David Katz raised the price target on Golden Entertainment (NASDAQ: GDEN) to $34.00 (from $23.00) while maintaining a Buy rating after the company reported 4Q20 results with $205.6M, above consensus' $200.9M. EBITDA was $38.9M compared to consensus' $39.5M. Results were mixed with upside in NV Distributed business offset by a slight miss at NV casinos. The analyst offered 5 takeaways from the call:

1) Record EBITDA in October, making up half of 4Q EBITDA and encouraging trends in Jan and Feb
2) In 4Q20, Las Vegas Locals casinos saw EBITDA margin expanded by 1,000 bps. Mgt expects current margin level to be largely sustainable
3) The Strat needs occupancy above 30% to breakeven, with recent weekend occupancy approaching 80%; March occupancy likely above 50%
4) CZR's acquisition of WMH triggers a Change of Control clause in GDEN's partnership with WMH; Expect to receive $75M of cash payment
5) Deleveraging remains top priority

The analyst stated "as capex is expected to be meaningfully lower going forward, we are raising our FY22 FCF/sh to $4.16 from $3.67. Based on our increasingly bullish view on Las Vegas recovering and GDEN's improved leverage profile, we are increasing our valuation multiples to 8.0X for EV/EBITDA and 9.5X P/FCF from 7.5X and 9X prior".
Expect leverage to drop below 5X by year-end with capital returns a possibility below 4X.

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