Churchill Downs (NASDAQ:CHDN) is looking to ride its hot streak after reporting a record handle and EBITDA from the historic 150th running of the Kentucky Derby.
The Kentucky Derby haul was approximately in line with existing forecasts, such as the one from Jefferies. However, analyst David Katz said the strong Derby numbers nevertheless support several aspects of the bullish thesis on the stock.
“First, it demonstrated CHDN’s ability to execute and grow the iconic asset. Second, capital investment execution broadly is a positive given the growth plans,” he observed.
Of note, wagering from all sources on Derby Day was up 11.0% to a new record high of $320.5M, and all-sources handle for Derby Week rose 8.4% to a new record of $446.6M, vs. $412.0M in 2023. In terms of the impact on Q2 results, the EBITDA growth of $26M to $28M from a year ago from the event is expected to push up Q2 estimates.
“We expect that the YoY growth was driven by normal trends in consumer demand, ticket price increases, in addition to the all-new $200M Paddock with two new luxury reserved seating areas and the continued ramp in year-2 of the Turn One expansion,” updated Katz.
The firm sees CHDN’s Paddock project as a positive allocation of capital for the asset, as it continues to increase the experience and revenue-generating opportunities from the +157K Derby attendees.
Jefferies has a Buy rating on Churchill Downs (CHDN) and price target of $153. The PT is based on an estimated FY25 EBITDA multiple of 11.9X and estimated FY25 EPS multiple of 22.5X.
Shares of Churchill Downs (CHDN) are up more than 5% since the Derby numbers were announced and trade more than 12% above their 200-day moving average.