Red Rock Resorts (RRR) PT Lowered to $55 as Stifel is Looking for a Pullback to Upgrade

Stifel analyst Steven Wieczynski lowered the price target on Red Rock Resorts (NASDAQ: RRR) to $55.00 (from $58.00) after 4Q21 margins came in much higher than expected and accelerated sequentially. This is a large change from 3Q21 where margins decelerated sequentially, causing investors to panic.

The analyst stated "What we think is most important is that RRR was able to produce these margins despite the LV locals market being severely impaired (Omicron/mask mandates) over the last couple of weeks of the quarter. It would have been interesting to see what margins would have looked like under a more normalized environment. Longer term we continue to believe spending/visitation trends will remain relatively healthy across the Las Vegas locals market while RRR’s diminishing cost structure should ultimately allow for greater flow through. We remain neutral but believe this is a name to watch closely given a favorable setup moving forward." The analyst stated "Our target price moves to $55, reflecting the output of our revised 2023E SOTP, discounted back. At this point we believe any type of material pullback in RRR shares would cause us to reevaluate our neutral stance. We think this story becomes more attractive by the day and while we model a deceleration in margins moving forward, if we are wrong, shares are massively undervalued at current levels."

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