What Happened?
Shares of casino resort and entertainment company Red Rock Resorts (NASDAQ: RRR) jumped 6% in the morning session after the company reported blowout second-quarter financial results that significantly beat analyst expectations. The casino and resort operator announced second-quarter earnings and revenue that significantly surpassed analyst expectations. Revenue increased 8.2% year-over-year to $526.3 million, while net income surged 55.1% to $108.3 million. This translated to quarterly earnings of $0.95 per share, blowing past the consensus estimate of $0.40. Company management attributed the “exceptional” quarter to its Las Vegas operations, which posted the highest quarterly net revenue and adjusted EBITDA in the company's history. The strong performance prompted a positive reaction from Wall Street, with several analysts, including those from Truist Securities and JMP Securities, raising their price targets on the stock.
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What Is The Market Telling Us
Red Rock Resorts’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 3.3% on the news that Truist Securities upgraded the casino operator's stock to "Buy" from "Hold" and significantly raised its price target. Truist boosted its price target on the shares to $67 from $45, suggesting a considerable upside from the stock's current levels. The analyst cited the strength of the Las Vegas locals market, which is benefiting from favorable population trends. According to Truist, Red Rock is capitalizing on a "flight to quality" more than anticipated and is experiencing less disruption from construction than previously feared. The upgrade also pointed to a new "No Tax On Tips" law as a positive development for the Las Vegas market, which could potentially add $80 million to $85 million in discretionary income for consumers. This improved outlook from a Wall Street analyst has provided a clear catalyst for the stock's advance.
Red Rock Resorts is up 32.8% since the beginning of the year, and at $59.41 per share, has set a new 52-week high. Investors who bought $1,000 worth of Red Rock Resorts’s shares 5 years ago would now be looking at an investment worth $5,069.
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