Is Churchill Downs Stock a Buy Before the Kentucky Derby?

Like clockwork, the NFL's large crippled is played successful February. The NCAA Tournament tips disconnected successful March, and those who travel the "sport of kings," that being equine racing, cognize that the Kentucky Derby takes spot connected the archetypal Saturday of May.

Get your mint juleps acceptable due to the fact that that's close astir the corner. The "Run for the Roses" has been held each twelvemonth for 151 consecutive years, making it the longest-running uninterrupted sporting lawsuit successful the U.S. It takes spot astatine iconic Churchill Downs racetrack successful Kentucky. 

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Now let's speech astir Churchill Downs (NASDAQ: CHDN), the stock. Not surprisingly, the Kentucky Derby puts eyeballs connected this sports betting stock, and this pun is precise overmuch intended, but it isn't a one-trick pony. In fact, there's a broader communicative that marketplace participants whitethorn privation to aftermath up to, and 1 that signals a pre-Derby accidental successful the stock.

Yes, the archetypal lawsuit successful the Triple Crown is simply a marquee lawsuit and 1 that Churchill Downs investors follow. Last year's grip of $473.9 cardinal topped the erstwhile precocious acceptable successful 2024, and with Churchill Downs' plans to grow its namesake track, it's imaginable that Derby betting volition smash records for years to come.

However, the fortunes of this consumer discretionary stock don't hinge connected a azygous event. Churchill Downs generated 2025 gross of $2.92 cardinal connected net earlier interest, taxes, depreciation, and amortization (EBITDA) of $1.2 billion, of which the Derby was a tiny part.

The operator's large moneymakers are humanities racing machines (HRMs) and determination casinos. An HRM is akin to a slot machine, but successful this case, the bettor is wagering connected a antecedently tally equine race. HRMs aren't astir arsenic communal arsenic slots, but they're allowed successful Kentucky and Virginia, wherever Churchill Downs controls 10,000 specified devices crossed 16 locations. The gaming institution combines its unrecorded and humanities businesses, and the results talk for themselves, arsenic that portion accounted for $1.44 cardinal of the operator's 2025 gross and $637 cardinal of its adjusted EBITDA.

Some investors don't cognize that Churchill Downs besides afloat controls 10 gaming venues successful 9 states and has equity interests successful immoderate others, meaning this is simply a casino stock. Those properties are determination casinos, meaning they're wrong driving region for galore of the astir devoted customers. Said different way, Churchill Downs' determination venues flight immoderate of the downside associated with precocious state prices and immoderate of the volatility seen successful destination gaming markets specified arsenic the Las Vegas Strip.