Red Rock Resorts, the organization behind Station Casinos and the Palms, is feeling more weight than other club administrators according to a report which was published by reputable Gaming website Calvinayre.com.
This is reflected in its stock, which has just risen 6% this year, much lower than the remainder of the pack. Experts accept that financial specialists are in a method of keep a watch out, wanting to see some sort of cost-cutting endeavors with respect to the business.
The Fertitta brothers, Frank and Lorenzo are the owners of Red Rock. After a recent purchase of another 2.24 million shares last August, Frank, who serves as CEO, and his brother own about 41.2 percent of the company. That purchase has shown no real reward, as the stock of the company has remained virtually unchanged since June 2016.
Nevertheless, the horizontal image of the price speaks volumes relative to others, considering that Boyd Gaming is up more than 54% and Penn National Gaming is up 52.51% over the same period.
In 2016, the Fertittas bought the Palms for $312.5 million and then dropped another $679 million into the property. The investment of $1 trillion has not paid off their ambitions, and they are now searching for ways to cut costs at the venue.
Part of this involves shutting down the Kaos nightclub, which, according to a recent announcement by Red Rock, would force the company to take $28 million in charges over the next two years.
According to Stifel analyst Steven Wieczynski, the lackluster performance at the venue, as well as the weak return at the Palms, is most likely the reason why investors are not attracted to the company now.
He said recently about Red Rock, “While [Red Rock’s] 3Q19 results showed a slight miss relative to consensus, we believe investor expectations were muted around the quarter, given the continued unknown around the Palms/Palace Station ramp.”
Wieczynski, who gives the company a “Hold” rating with a price target of $23 – a little below the $24.10 most Wall Street analysts have forecast – adds, “We would expect shares to come under pressure tomorrow, as management noted the Palms ramp will continue to take some time, while the Palace Station ramp has been slower than expected as its expense structure needs some fine-tuning.”
An inability to turn a stronger profit is not the only thing hurting the casino operator.It was involved at many of its sites in fights with workers who voted to unionize. The Fertitta brothers, however, refuse to recognize the efforts and this has resulted in legislative scrutiny as well as political front-line support. In relation to these unionization attempts, the organization also faces a lawsuit that it may have colluded with lawmakers in breach of the Capitol Hill ethics laws.