Gaming Stocks: Churchill Downs Tops List for Best Risk-RewardOpportunity
**Churchill Downs Announces Expansion of Share Repurchase Plan and Major Investments**
In a recent announcement, Churchill Downs, the renowned operator of the iconic Kentucky Derby racetrack, has revealed plans to bolster its financial position by adding $374.4 million to its existing share repurchase programme, initially unveiled in 2021. This move aims to strengthen the company's capital structure and support its growth strategies.
As of March 29, 2025, the closing price of Churchill Downs' stock stood at $111.23. The company has also planned to invest between $350 million to $400 million this year for enhancements, with some improvements expected to be ready for the 2026 Derby.
Executives from the gaming company are accelerating marketing efforts for the Derby City HHR facility, expressing confidence that it will prove to be a long-term winner. This facility, which opened in 2024, has had a slow start but is set to benefit from the planned improvements. The final spending cycle for these enhancements is expected to be completed in late 2027 or early 2028.
The stock of Churchill Downs (NASDAQ: CHDN) has slumped by 16.71% year-to-date, reflecting the current macroeconomic environment acting as a headwind to gaming equities, particularly operators of land-based gaming venues. However, the company's financial performance remains robust, with solid revenue growth of approximately 8.7–8.75% year-over-year as of Q1 2025.
Churchill Downs exhibits strong profitability, with a net margin around 11.9–15.2% and an impressive Return on Equity (ROE) reported between 7.12% and an even higher 40.7% in different reports. This indicates effective use of shareholder capital. Despite this, the company's high debt-to-equity ratio, around 4.5, is a notable risk factor that could affect performance if a recession dampens consumer spending in the gaming sector.
Analysts generally view the stock favorably, with "outperform" and "buy" ratings prevalent, although some caution exists regarding valuation and economic uncertainties. David Katz, the Jefferies analyst, has reiterated a "buy" rating on Churchill Downs with a price target of $162. Katz and his team recently toured Churchill's Derby City historical horse racing (HHR) facility to assess its progress.
Churchill Downs is described as a "strong opportunity" in a weak gaming space, suggesting it could lead when the space rebounds. The company operates across live and historical racing, wagering services, and regional casino gaming, successfully leveraging multiple revenue streams, including live racing events, online wagering, and casino gaming. Investments in wagering services and gaming segments position the company to benefit from growing consumer interest in these areas, supporting revenue growth and diversification.
In February 2025, Churchill Downs announced a multi-year spending program that could see it spend up to $900 million to expand and renovate its namesake racetrack, with the new seating and amenities intended to be ready for the 2028 edition of the first leg of the Triple Crown.
Overall, Churchill Downs appears well-positioned for future growth, provided it can manage its debt prudently and navigate potential recessionary impacts in the gaming industry.
- The financial sector seems to have displayed interest in Churchill Downs' gaming business, as analyst David Katz from Jefferies gave a "buy" rating on the company, with a price target of $162.
- Apart from the horse racing industry, Churchill Downs is also investing in its business segments, such as wagering services and casinos, to capitalize on growing consumer interest in these areas.
- Churchill Downs' financial investments are not solely limited to horse racing events. For example, in 2025, they announced a multi-year spending program worth up to $900 million to renovate and expand their namesake racetrack, aiming to ready the new seating and amenities for the 2028 Kentucky Derby.
