Is Churchill Downs Stock a Buy Before the Kentucky Derby?

Like clockwork, the NFL’s massive sport is performed in February. The NCAA Match ideas off in March, and those that observe the “sport of kings,” that being horse racing, know that the Kentucky Derby takes place on the primary Saturday of Might.

Get your mint juleps prepared as a result of that is proper across the nook. The “Run for the Roses” has been held yearly for 151 straight years, making it the longest-running uninterrupted sporting occasion within the U.S. It takes place at iconic Churchill Downs racetrack in Kentucky. 

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Now let’s speak about Churchill Downs (NASDAQ: CHDN), the inventory. Not surprisingly, the Kentucky Derby places eyeballs on this sports activities betting inventory, and this pun could be very a lot supposed, nevertheless it is not a one-trick pony. In actual fact, there is a broader story that market individuals could wish to get up to, and one which alerts a pre-Derby alternative within the inventory.

Sure, the primary occasion within the Triple Crown is a marquee occasion and one which Churchill Downs traders observe. Final 12 months’s deal with of $473.9 million topped the earlier excessive set in 2024, and with Churchill Downs’ plans to broaden its namesake monitor, it is attainable that Derby betting will smash data for years to return.

Nevertheless, the fortunes of this client discretionary inventory do not hinge on a single occasion. Churchill Downs generated 2025 income of $2.92 billion on earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) of $1.2 billion, of which the Derby was a small half.

The operator’s massive moneymakers are historic racing machines (HRMs) and regional casinos. An HRM is akin to a slot machine, however on this case, the bettor is wagering on a beforehand run horse race. HRMs aren’t practically as widespread as slots, however they’re allowed in Kentucky and Virginia, the place Churchill Downs controls 10,000 such units throughout 16 areas. The gaming firm combines its dwell and historic companies, and the outcomes communicate for themselves, as that unit accounted for $1.44 billion of the operator’s 2025 income and $637 million of its adjusted EBITDA.

Some traders do not know that Churchill Downs additionally absolutely controls 10 gaming venues in 9 states and has fairness pursuits in some others, which means it is a on line casino inventory. These properties are regional casinos, which means they’re inside driving distance for lots of the most devoted prospects. Stated one other method, Churchill Downs’ regional venues escape among the draw back related to excessive gasoline costs and among the volatility seen in vacation spot gaming markets such because the Las Vegas Strip.

Betting on the ponies is tough, however traders may benefit from backing the home with Churchill Downs. There’s affirmation the percentages are on their facet.

A beautiful a part of the Churchill Downs funding thesis is that the operator owns all of its actual property. That goes a good distance towards retaining the steadiness sheet agency as a result of, in contrast to some rivals within the regional gaming area, this firm has no long-term obligations to landlords.

That frees up capital for shareholder rewards, and Churchill Downs makes good use of that money. Since 2015, the corporate has repurchased $2.1 billion of its shares, and the dividend hike introduced in January marked the fifteenth consecutive 12 months the payout was elevated.

Before you purchase inventory in Churchill Downs, think about this:

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Todd Shriber has no place in any of the shares talked about. The Motley Idiot recommends Churchill Downs. The Motley Idiot has a disclosure coverage.

Is Churchill Downs Inventory a Purchase Earlier than the Kentucky Derby? was initially revealed by The Motley Idiot