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Deutsche Bank Issues Buy Rating for GLPI, Hold for VICI

Deutsche Bank has issued its 2025 outlook for Gaming and Leisure Properties Inc. (GLPI) and VICI Properties, assigning GLPI a “Buy” rating with a price target of $54 and VICI a “Hold” with a $31 price target. Analyst Carlo Santarelli’s insights shed light on the reasoning behind these ratings, citing market dynamics and growth opportunities for both companies.

GLPI: Positioned for Growth with Strong Pipeline

GLPI, which currently trades in the mid-to-upper $40s, stands out for its robust growth potential in 2025. Santarelli emphasised that the company’s structured pipeline and ability to execute transactions are key differentiators. A potential increase in collaboration with tribal entities could serve as a catalyst for the stock.

  • Pipeline Strength: GLPI is actively engaging in discussions with several tribal entities, which could yield incremental announcements and boost investor confidence.
  • Lease Coverage: Despite slower regional gaming performance, GLPI’s lease coverage remains strong, comfortably exceeding escalator thresholds.
  • Dividend Yield: At a 6.1% yield based on its $3.04 annual run-rate dividend, GLPI presents an attractive opportunity relative to industry peers. The company is also projected to grow its dividend by a 4% compound annual growth rate (CAGR), with a potential dividend increase expected in early 2025.

Santarelli notes that executing transactions like the Penn or Bally’s Lincoln deals in 2025 would bolster forecasts and reinforce GLPI’s position as an industry leader.

GLPI and VICI stock performance chart

VICI: Stability Amid Challenges

VICI Properties, which trades in the upper $20s, faces a different trajectory. Santarelli assigned the company a “Hold” rating, citing limited near-term growth prospects. However, he acknowledged the company’s success in executing accretive transactions over the last 18 months.

  • Range-Bound Performance: VICI shares have been relatively stable, with a CAGR of 2% forecasted through 2026. This is partly due to a slowdown in traditional sale-leaseback transactions within the gaming sector.
  • CPI-Linked Escalators: While VICI benefited significantly from CPI-linked escalators in the past, their impact is expected to diminish moving forward. However, they will still contribute modestly to growth in 2025 and beyond.
  • Loan Book Concerns: With just 4% of cash net revenue tied to its loan book, Santarelli believes investors are discounting this segment, creating a drag on VICI’s valuation.

Santarelli highlighted the importance of a return to traditional sale-leaseback transactions as a catalyst for VICI shares. Until then, the company may struggle to improve its current growth trajectory.

Industry Context: Challenges and Opportunities

The regional gaming market, which underpins much of GLPI and VICI’s revenue, is facing headwinds. Slower performance and rising expenses could challenge escalator thresholds, potentially impacting future forecasts. However, GLPI’s strong lease coverage and strategic pipeline position it well to navigate these hurdles.

  • GLPI Advantages:
    • Strong lease escalator thresholds.
    • Tribal partnerships offering new revenue streams.
    • High dividend yield and growth potential.
  • VICI Challenges:
    • Limited growth in the absence of new transactions.
    • Reduced benefits from CPI-linked escalators.
    • Investor scepticism around its loan book.

Analyst’s Perspective: Catalysts and Risks

For GLPI, the ability to execute its pipeline and maintain financial leverage while growing its dividend makes it an attractive investment. On the other hand, VICI’s growth hinges on a return to sale-leaseback transactions, which depend on broader capital market conditions.

Santarelli remains optimistic about GLPI’s ability to drive value in 2025, citing its attractive valuation and dividend yield. For VICI, the path forward appears less clear, with limited near-term catalysts to spur significant growth.

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