Should The Rally Continue In Boyd Gaming Stock?

According to reports, Flutter Entertainment has delayed the partial listing of FanDuel to sometime next year. Boyd Gaming’s (NYSE: BYD) 5% stake in FanDuel has been key to the monumental rise in its stock price since February 2020. Interestingly, prominent sports betting stocks including Draft Kings and Penn National Gaming have observed a steep fall since March 2021 but, Boyd stock has remained fairly level. Our earlier analysis, Does Boyd Stock Offer An Early Opportunity Ahead Of FanDuel Spin Off?, highlights that Boyd stock looks stretched to realize more gains – comparing the growth in market capitalization of Flutter Entertainment (Flutter has 95% stake in FanDuel). Our interactive dashboard analysis highlights Boyd Gaming’s stock during the 2008 recession vs now.

Timeline of 2020 Crisis So Far:

• 12/12/2019: Coronavirus cases first reported in China
• 1/31/2020: WHO declares a global health emergency.
• 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
• 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
• From 3/24/2020: S&P 500 recovers 94% from the lows seen on Mar 23, 2020, with the Fed’s multi-billion dollar stimulus package keeping the economy afloat during the prolonged lockdown and the vaccination drive allowing things to gradually return to near-normal conditions despite several waves of Covid infections.

In contrast, here’s how BYD and the broader market performed during the 2007/2008 crisis.

Timeline of 2007-08 Crisis

• 10/1/2007: Approximate pre-crisis peak in S&P 500 index
• 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
• 3/1/2009: Approximate bottoming out of S&P 500 index
• 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

Boyd Gaming Stock vs S&P 500 Performance Over 2007-08 Financial Crisis

BYD stock declined from levels of around $43 in October 2007 (pre-crisis peak) to levels of around $4 in March 2009 (as the markets bottomed out), implying BYD stock lost 90% from its approximate pre-crisis peak. It recovered post the 2008 crisis to levels of about $8 in early 2010 – rising by 100% between March 2009 and January 2010. In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.

Boyd Gaming’s diversified U.S. presence is key to top line recovery in 2021

Boyd Gaming’s revenues grew by 38% from $2.4 billion in 2017 to $3.3 billion in 2019, majorly assisted by acquisitions and macroeconomic growth in the U.S. Despite strong growth, the company’s operating margins remained fairly stable at 14% and net margins trended downward due to rising interest expenses. However, Boyd’s diversified presence across multiple states in the U.S. has been key to top line recovery in Q2 2021. Per recent filings, the company reported $1.65 billion of total revenues in H1 2021, almost comparable to $1.67 billion reported in H1 2019. (related: we compare the revenue trends of Wynn Resorts and Draft Kings in, Is Wynn Resorts Stock A Better Bet Over Draft Kings?)

CONCLUSION

Phases of Covid-19 crisis:

• Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
• Late-March 2020 onward: Social distancing measures + lockdowns
• April 2020: Fed stimulus suppresses near-term survival anxiety
• May-September 2020: Recovery of demand, with the phased lifting of lockdowns – no panic anymore with number of cases appearing to have plateaued
• October 2020-February 2021: Unprecedented surge in Covid cases forcing a fresh round of lockdowns across the nation
• Since March 2021: Ongoing vaccination drive and gradual re-openings drive an improvement in demand – buoying market sentiment

Considering the monumental rise in Boyd stock since February 2020 levels, we believe that the stock price is stretched. But should you, Buy The Dip In Las Vegas Sands Stock?