What happened
Shares of Churchill Downs (CHDN 0.44%) surged in 2019, as the company continued to make acquisitions and gained on investor optimism for legalized sports betting . As a result, the stock finished the year up 69%, according to data from S&P Global Market Intelligence.
The following chart shows the stock's trajectory for the year as the gains came in multiple stages.
So what
Churchill Downs, which owns a number of racetracks, casinos, and gaming businesses in addition to its namesake, started off the year on the right track, gaining 13% in January as it scored an analyst upgrade from Jefferies and closed on its acquisition of Presque Isle Downs and Casino in Erie, Pennsylvania. Jefferies analyst David Katz upgraded the stock to "buy" and said the sell-off at the end of 2018 presented an appealing buying opportunity, as Churchill Downs has a strong balance sheet and near-term growth catalysts. The company also implemented a 3-for-1 stock split on Jan. 28.
Image source: Churchill Downs.
At the end of February, the stock slipped in spite of a solid earnings report, but it bounced back at the end of April, when the company showed off 40% revenue growth to $265.4 million, with the help of acquisitions, and adjusted earnings per share jumped from $0.36 to $0.63, which beat estimates at $0.40.
The stock's biggest surge of the year seemed to come in June, after Illinois legalized sports gambling and approved six new casinos, giving Churchill Downs an opportunity to capitalize on its recent acquisition of a 62% stake in Rivers Casino near Chicago. Telsey also upgraded the stock to "outperform."
Through the second half of the year, the stock continued to gain as Churchill Downs made moves to offer sports betting in Indiana and Colorado, and the company acquired the Turfway Park racetrack.
Now what
With legalization trends favoring sports betting in multiple states, Churchill Downs looks poised to continue outperforming, as the stock has been a big winner over the last decade thanks to its acquisition strategy. Through the first three quarters of 2019, revenue is up 33% and adjusted EBITDA has increased 32%. Considering the favorable regulatory landscape, expect Churchill Downs to continue its acquisition strategy and take advantage of sports gaming legalization.
