Gaming and Leisure Properties (NASDAQ:GLPI) received a boost on Wednesday after Deutsche Bank upgraded the casino-focused real estate investment trust (REIT) from “Hold” to “Buy,” citing a robust pipeline, favorable valuation metrics, and a well-positioned balance sheet. The investment bank also raised its price target to $54 from $49, indicating a 7% upside from Tuesday’s closing price.
Deutsche Bank analyst Carlo Santarelli pointed to GLPI’s resilience in a challenging domestic gaming environment, highlighting its appeal to risk-averse investors. “We believe the choppy domestic gaming environment lends to investors seeking exposure through more risk-averse avenues, within which we believe GLPI firmly falls,” he wrote in a note.
Looser monetary policy from the Federal Reserve could act as a catalyst for GLPI shares, which have been underperforming the broader market. Recent rate cuts — 50 basis points in September followed by 25 basis points earlier this month — signal a favorable climate for real estate investments.
GLPI’s year-to-date gain of just 1% pales in comparison to the S&P 500’s 24% increase, leaving room for potential upside as rates continue to decline.
GLPI’s 6% dividend yield far exceeds returns from low-risk government bonds and most gaming equities, making it an attractive option for income-focused investors. Analysts have also praised the REIT’s diversified portfolio, which has limited exposure to Las Vegas — a stark contrast to rival VICI Properties (NYSE: VICI), whose cash flow is heavily reliant on Caesars Entertainment and MGM Resorts.
Brad Thomas, a Seeking Alpha contributor, said: “Gaming and Leisure Properties, despite being less popular than its peer, managed to see higher AFFO growth from the previous year, a testament to their fundamentals.”
GLPI’s growth drivers include ownership stakes in major future projects, such as Bally’s permanent Chicago casino, a Major League Baseball stadium in Las Vegas, and a proposed Bally’s casino hotel. The company’s access to equity capital and limited refinancing risks further strengthen its position in the market.
Santarelli underscored these strengths, writing: “We see the following as drivers of upside in shares: a healthy pipeline post an active 2024, a well-positioned balance sheet, healthy tenant coverage positions, and favorable relative valuation metrics.”
As the Federal Reserve signals further rate cuts in early 2025 and investors rotate back into income-producing assets, GLPI is well-positioned to capitalize on its compelling valuation, geographic diversification, and robust pipeline.
“Although I suspect some uncertainty and share price volatility in the coming months, Gaming and Leisure’s strong fundamentals and >6% yield make them a compelling choice for investors,” Thomas added.
Shares of GLPI were trading 0.32% higher in pre-market trading on Wednesday at $50.41.
