MW The best Kentucky Derby bet may actually be investing in Churchill Downs

By Charles Passy

Churchill Downs Inc. is the owner of the track where the world-famous horse race is run - and some analysts say its stock has plenty of upside right now

Are you better off betting on a horse or on a horse track?

That's a question some may want to ask themselves ahead of Saturday's annual running of the Kentucky Derby. The track in question, of course, is the famed Churchill Downs in Louisville, Ky., which has been home to the Derby - known as the Run for the Roses - for 151 years.

And it's owned by a public company, Churchill Downs Inc. (CHDN), which also operates casinos and other racing and gaming properties across a number of states, from the Calder Casino in Miami Gardens, Fla., to the Chasers Poker Room in Salem, N.H..

The Churchill Downs track and the Kentucky Derby account for a relatively small portion of the company's annual revenue, which totaled $2.73 billion in 2024. The adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, a measure of underlying profitability, amounted to $1.16 billion for the year.

Still, the company has not exactly been embraced by investors of late, with its share price falling from an 18-month closing high of $147.45 on Nov. 6 to current levels just above $90. Over the past three months, it has tumbled nearly 25% while the S&P 500 index SPX has slipped roughly 6%.

But every analyst who covers the stock remains bullish, with an average target price more than 50% above current levels at $139.78, according to data from FactSet.

Analysts say the Derby does a play an important role for Churchill Downs, the company. For starters, the money it generates can't entirely be ignored.

Jeff Stantial, a managing director with Stifel, says the race - and the week of events connected to it, plus the television revenue - should equate to an Ebitda haul of $180 million this year. That adds up to about 14% of Stifel's estimate for the company's overall 2025 earnings.

Just as important, the Derby is a marquee event that has a halo effect of sorts for the Churchill Downs company, analysts say. And, as Stantial notes, investors can't really own a piece of any other big sporting event - say, the Super Bowl - in such a direct way.

The Derby "gets undue focus because it's such a crown-jewel asset for them," Stantial told MarketWatch. His price target for the stock is $130.

Stantial's point is seconded by Jordan Bender, a senior equity research analyst with Citizens. Speaking of the Derby, he said, "There are not many [event-driven] assets out there that can drive this kind of earnings power."

So, why has the company's stock performed so poorly in recent months? A variety of factors, analysts say.

Begin with the macroeconomic environment - the tariff-related worries and concerns about a looming recession - that have weighed on almost all companies. Add in the fact that it may be tough for the Churchill Downs company to see significant year-over-year earnings growth for the Derby this year, since the 2024 edition was the 150th running and thus generated extra interest - and, by extension, extra income.

But analysts point to issues beyond the Derby. Most notably, they cite the fact that the Churchill Downs company has not had as much success as foreseen with a new Virginia facility, the Rose Gaming Resort, which opened in November 2024.

"The ramping-up of that property has just gone slower," Bender said.

But Bender sees solid earnings potential for the company overall in the future, and his target share price of $144 is slightly higher than the analyst consensus. He also views favorably a recent decision by management to delay a $900 million improvement project for the Churchill Downs track, with Bender noting that it will free up cash for other matters, including possible stock buybacks.

In a recent earnings call, Churchill Downs CEO Bill Carstanjen explained that the delay was tariff-related in that it is becoming challenging to predict construction costs owing to potential increases in the price of building materials.

"We have made the difficult decision to temporarily pause this multiyear effort in order to let things settle down," Carstanjen said.

The chief executive also acknowledged during the call that there been "less demand" for some Derby tickets this year, but, he added, "I think when you see the Derby this year, it will look like every other Derby - it will be a packed house."

As for the company's overall prospects, Carstanjen said, "Churchill is an exceptional company that continues to deliver growth and with [a] pipeline to a great future. We have demonstrated we can nimbly apply our strategy in any economic environment to effectively manage our capital to create best-in-class value for our shareholders."

Of course, for those who would rather pick a pony than pick a stock, that time-honored option remains. Going into Saturday's Derby, the favorite is a horse named Journalism. The current odds on him are 3-to-1.

-Charles Passy

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May 02, 2025 15:29 ET (19:29 GMT)

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