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Bally's Close to Making a Huge Las Vegas Strip Deal

The casino operator does not own the casino that carries its name, but changes are in the works.
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In early August, Bally's Corp.  (BALY) - Get Free Report stock tumbled after the casino operator cut its 2022 revenue and EBITDA estimates due to weakness at its venue in Atlantic City. 

The company is now expecting 2022 EBITDA between $535 million and $550 million, down from its previous forecast between $560 million and $580 million. The company now expects sales between $2.2 billion and $2.3 billion for the year, down from a previous estimate between $2.4 billion and $2.5 billion. 

But this week, the stock was on a tear, and is now nearly 15% higher than it was when it reported on August 5. 

"Given commentary around the guidance cut, we expect the miss on margins reflects difficulties improving profitability at Bally's Atlantic City," Stifel analyst Jeffrey Stantial said in a recent note, according to Casino.org

Stantial has a $29 price target and buy rating on Bally's. 

So why the optimistic outlook for a company that just lowered its full-year guidance in two key categories? It may have something to do with a deal that is reportedly closing soon for the company. 

Bally's Close to Closing on Tropicana

Bally's hopes to close its $308 million purchase of the Tropicana as soon as next month, though the company doesn't have plans to upgrade the property for at least a year.

"We will run the property on an as-is basis at least for the next 12 months until we have identified the plan and the partnerships that we want going forward,” CEO Lee Fenton said during the company's earnings call

Bally's announced the purchase of the Tropicana in April 2021. It is currently being operated by Penn Entertainment  (PENN) - Get Free Report, formerly Penn Gaming. The real estate the casino sits on is owned by GLPI.

Under Bally's deal, GLPI will lease back the property for $10.5 million a year. 

Bally's, which has no connection to the resort on the Las Vegas Strip with the same name, is expected to rename the Tropicana after the acquisition is complete, the Las Vegas Review-Journal reported.

Vegas Shuffle on The Strip Continues 

In 2020, Caesars Entertainment  (CZR) - Get Free Report sold the Bally's brand to Twin River Worldwide Holdings, which then adopted the name Bally's and added the name to all of its existing properties. 

Earlier this year, Caesars announced the casino resort will be rebranded as the Horseshoe Las Vegas with the rebrand expected to be complete by the end of the year. 

The Horseshoe hosted the 2022 World Series of Poker earlier this summer. 

Caesars and MGM Resorts  (MGM) - Get Free Report dominate the south and central Las Vegas Strip. Their properties serve all audience segments, from high-end experiences like MGM Grand and Caesars Palace to lower-end properties like Caesars Bally's and Flamingo and MGM's Luxor and Excalibur.

Caesars CEO Tom Reeg thinks the Strip has too many rooms, and that hurts casinos' pricing power. 

The company has been exploring selling one of its Las Vegas properties, with Paris, Planet Hollywood, and Flamingo being the properties most speculated about.

"Well, we're 23,000 rooms today. You're taking out the Rio rooms, and then you take out a property, depending on which property it is, let's say 3,000 to 4,000 rooms," Reeg said during his company's fourth-quarter-earnings call, in response to a question about selling a Strip property.