Red Rock Best of Breed Among Las Vegas Locals Casino Stocks
Red Rock upgraded, analyst sees minimal disruption from Durango expansion
The three Las Vegas locals casino stocks are, in alphabetical order, Boyd Gaming (NYSE: BYD), Golden Entertainment (NASDAQ: GDEN), and Red Rock Resorts (NASDAQ: RRR). The last is first in terms of 2025 performance and a Wall Street analyst sees good reasons why that’s the case.
Red Rock upgraded, analyst sees minimal disruption from Durango expansion
Durango Casino & Resort in Southwest Las Vegas. Expansion there is among the catalysts for operator Red Rock’s stock. (Image: Eater Las Vegas)
In a new report to clients, Truist Securities analyst Barry Jonas upgraded Red Rock to “buy” from “hold,” a move that contributed to some Wednesday upside for the stock. He acknowledges that while the shares have rallied in considerable fashion this year, more upside could be in the offing, helped by resilience in the Las Vegas locals segment and the removal of taxes on tips in the One Big Beautiful Bill Act (OBBBA).
The Locals market appears to be very well positioned amidst favorable population trends and RRR is benefiting more than we expected given a continued flight to quality,” opines Jonas. “As former Vegas Local residents, we have always viewed RRR as holding some of the best in class properties.”
Estimated Impact of Tax Policy
Jonas estimates the no tax on tips policy could lift discretionary income in the Las Vegas Valley by $80 million to $85 million. Red Rock previously said the policy could juice the local economy by as much as $200 million while creating up to $3 million in savings on administrative expenses.
Construction Disruptions Less Than Feared
Red Rock is currently enhancing three of its casinos — Durango, Green Valley Ranch, and Sunset Station. Such efforts often create disruptions at the affected properties, but it appears the operator has been able to mitigate that scenario.
Durango Expansion Mitigates Disruptions
Jonas points out Red Rock previously estimated construction at those properties could ding second-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) by as much as $25 million, but that figure could be less than feared.
Better-Than-Expected Market Demand
“This likely speaks to better than expected market demand as well as better yielding of existing gaming product offsetting any temporary reduced capacity,” wrote the analyst.
The Future of Red Rock Resorts
When it comes to gaming stocks, analysts and investors often and rightfully ask “What’s next?” and it’s on operators to supply credible answers. Red Rock checks that box with an enviable product pipeline focusing entirely on the Las Vegas locals.
A Pipeline Focused on Las Vegas Locals
Jonas views Red Rock’s portfolio catalysts as the aforementioned Durango expansion, the planned Inspirada luxury casino hotel in Henderson — a property expected to hold much of the same appeal as Durango and Green Valley Ranch — and the Cactus property.
“With the company now in harvest mode from its Durango project (rapidly deleveraging from 4.1x this year to 3.4x next year), we see upside around the growth pipeline,” adds the analyst. “Management expects to make an announcement providing more color (regarding Cactus) and timing details early next year.”
Shareholder Rewards
He also points out that Red Rock has the capacity for shareholder rewards, including $300 million remaining on a share repurchase program.
Conclusion
In conclusion, Red Rock Resorts is well-positioned for future growth, driven by its enviable product pipeline and improved market conditions. With its strong presence in the Las Vegas locals segment, the company is poised to benefit from tax policy changes and shareholder rewards.