MCRI - Monarch Casino & Resort soars with capital allocation potential in the mix

Monarch Casino & Resort ( NASDAQ: MCRI ) was the biggest gainer in the casino sector on Thursday afternoon with a 14.67% jump to $70.58.

Shares of MCRI rose to their highest level since the earlier part of March on the heels of a strong earnings report.

The casino stock also caught the attention of Stifel, which lifted its rating to Buy from Hold.

"We argue MCRI is comparatively well positioned given economic tailwinds in both operating markets [Black Hawk and Reno], further VIP upside in Black Hawk, a higher income customer base, and a pristine balance sheet which should allow for opportunistic deployment of capital in a potential downturn (acquisitions; continued property reinvestment)," wrote analyst Jeffrey Stantial.

The start of MCRI's capital return program is also expected to be a near-term catalyst.

Of high interest to investors, Stantiak and team view MCRI as an attractive takeout candidate for a larger player.

Here is MCRI's statement on capital allocation from earlier in the week: "Using cash flow from operations, we’ve now paid down a substantial portion of our debt. Given our continued cash flow growth and low leverage, we are evaluating a full range of capital allocation options, including potential share repurchases under our existing 2.9 million share repurchase authorization and potential dividend."

Stifel assigned a price target of $77 to MCRI.

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