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Red Rock Resorts: A Good Value Bet On The Vegas Locals Market With A Tribal Kicker (NASDAQ:RRR)

Red Rock Resorts: A Good Value Bet On The Vegas Locals Market With A Tribal Kicker (NASDAQ:RRR)

Price at writing $17.82 Signal: Buy

We have been watching the trading trends on Red Rock Resorts, Inc. (RRR) for some time. As of late, there appears to be growing bullish sentiment on the stock related to its 2Q20 performance. Like the entire gaming sector, it has been pandemic battered. But analysts believed the revenue profile of the quarter beat expectations of a lesser decline than forecast. This they reasoned, was a buy signal for the stock which has been trading ~$17 a share. Those results to us are not dazzling enough alone to warrant a move on the shares. But there are deeper rationales we see spread over a longer time frame that give us conviction that RRR may now be at an attractive entry point.

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As with all gaming stocks, we always begin with management culture and DNA. On that level, RRR stands with its Vegas locals competitors in executing a strong customer service culture dating back to its earlier life when it was Station Casinos. That is directly linked to the Fertitta family which founded and still controls a significant chunk of the equity.

(Biographical note: The Vegas Fertittas are distant cousins of Tilman Fertitta, swashbuckling Texas entrepreneur who runs Golden Nugget (GN), Landry’s Restaurants (LNY) and the Houston Rockets NBA team. Tilman and his family are prominent members of Houston’s business and philanthropic communities as are their Vegas cousins.)

Tilman made an exchange of stock run at Caesars (NASDAQ:CZR) last year that quickly faded at Eldorado Resorts (ERI) when Carl Icahn entered the fray. This gave rise to speculation among the chattering classes of Vegas that a possibility of a merger between the cousins could loom at some point going forward. I don’t put high percentage odds on that at the moment but

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