$30.30
$45.00
bear $30.30
base $37.80
bull $45.00
margin of safety $22.00
market price* $49.28
Red Rock Resorts owns Station Casinos, which operates seven major gaming and entertainment facilities and 13 smaller casinos (three of them 50% owned), almost all in the Las Vegas area. About 98.5% of 2025 revenue ($1,981.8 million of $2,011.5 million) came from the Las Vegas properties. The newest resort, Durango, opened in December 2023. Public Class A shares are only part of the ownership: the rest is held through LLC units that can be exchanged into Class A shares, so we measure everything per share on the full count of about 103 million. How we measured earning power. We start from cash generated by operations, remove swings in working capital, subtract stock-based pay as a real cost, and subtract capital spending, allowing only a small share of it to be treated as expansion. Red Rock spends heavily on building and rebuilding resorts, and we credit no return from that spending unless it is already in the results, so the figures are conservative. On this basis owner earnings per share were $4.79 in 2021 (a rebound year with unusually low spending of $61.3 million), $2.07 in 2022, negative $2.05 in 2023 (Durango construction, $699.5 million of spending), $2.27 in 2024 and $2.70 in 2025. We use the median of 2021 through 2025, $2.27 per share (about $233 million a year), because 2020 revenue fell to $1,182.4 million from $1,856.5 million the year before and 2021 onward describes the business as it now operates, through a full building cycle. Earlier years carried a different capital program and a different share count. The trailing record and our starting point. Owner earnings grew 18.9% in 2025 ($2.70 versus $2.27 in 2024). We assume no growth from the $2.27 level, which is below that recent pace. The first half of 2026 gives no reason to lift it: revenue was $1,017.6 million against $1,024.1 million a year earlier, with the second quarter down about 3% ($510.3 million versus $526.3 million). Net income fell to $159.3 million from $194.2 million, though operating cash flow rose to $297.8 million from $284.7 million. Capital spending in the first half was $257.0 million versus $146.4 million. Growth left out. Construction of the next phase of Durango began in January 2026 (larger casino floor, a 36-lane bowling center, movie theaters, a restaurant and food hall), and the company expects $375 million to $425 million of capital spending in 2026. The filings do not tell us what earnings that spending will add, and growth in the Las Vegas area or share gains are not things the company has locked in, so no growth is credited in any case. Buybacks are also not credited: the company bought back about 1.6 million shares for $85.0 million in 2025 and has $524.4 million of authorization left, but the pace has been uneven: 75,000 shares in 2024 against 1.6 million in 2025. Base case: $37.80 per share. Owner earnings stay at $2.27 per share indefinitely, discounted at 6%. What keeps them going is a portfolio of casinos, the company's operations dating to 1976, including resorts such as Durango on land it owns, all under gaming licenses, plus the record above of positive owner earnings in four of the last five years. Bear case: $30.30 per share. Owner earnings settle at $1.82 per share and stay there. This starts from 2022's $2.07, a year when revenue was $1,663.8 million, 17% below 2025's, and subtracts about $0.25 per share of higher interest. The company owes $3.4 billion and paid $201.9 million of net interest in 2025; $750 million of 4.5% notes fall due in 2028 and $500 million of 4.625% notes in 2031, and its most recent issue, in 2024, carried 6.625%. Refinancing both at that rate would add roughly $26 million a year. About $1.7 billion of borrowings float, so each 1 percentage point rise in rates costs about $17.3 million a year. Bull case: $45.00 per share. Owner earnings hold at 2025's $2.70 per share, a level the business has already reached, rather than falling back. We do not assume anything beyond that. What could make this wrong. Our deduction of all building spending may overstate the true upkeep cost: capital spending was $58.5 million in 2020 and $61.3 million in 2021 in those years, so ordinary upkeep may be far below what we subtract, and the shares could be worth more. On the other side, high debt, higher refinancing costs and weaker demand at its Las Vegas properties would lower value. The shares appear worth roughly $30 to $45, with $37.80 as the middle estimate. The margin-of-safety price is $22, a discount of about 42% to the middle estimate, reflecting the leverage and the reliance on a single metropolitan market.