After the casino operator reported the strongest quarterly profits in its 49-year history and reduced its 2025 capital expenditure forecast by $25 million, Red Rock Resorts' (NASDAQ: RRR) stock jumped on Wednesday.

The volume of shares of the Palace Station operator has already surpassed the daily average, and they are up 8% in noon trade.  Following the close of US markets on Tuesday, Red Rock released its second-quarter results, informing investors that while net revenue grew 6.2% to $513.3 million, EBITDA (profits before interest, taxes, depreciation, and amortization) jumped 7.3% to $239.4 million.  These statistics demonstrate the strength of the operator's primary customer base, which consists of Las Vegas residents.  Red Rock keeps showing off its ability to generate free cash flow.

"We converted 54% of our adjusted EBITDA into operating free cash flow, generating $124.3 million or $1.18 per share. This brings our year-to-date cumulative free cash flow to $217.3 million or $2.06 per share,” said CFO Stephen Cootey.

Between April and June, the EBITDA margin increased by 47 basis points.  The operator's eponymous casino hotel in Summerlin should see "full revenue recovery over the next couple of years," CEO Frank Fertitta informed analysts, claiming that the worst of the cannibalization impacts from the Durango Casino & Resort in Southwest Las Vegas are behind it.

In relation to Durango...

Since its opening in December 2023, Durango has quickly emerged as one of Red Rock's gems; Fertitta reports that the operator has attracted 108K new patrons to its database.

Through the second quarter of 2025, Durango is "on pace to become one of our highest margin properties, delivering a return net of cannibalization of over 15%," he said.  The $120 million expansion that Durango is presently undertaking is anticipated to be finished on schedule and within budget, wrapping up by December, just ahead of schedule.

The under-35 age group accounts for a large portion of Durango's customer base increase, indicating Red Rock is figuring out how to reach younger consumers at a time when Strip competitors are having difficulty doing so.

Along with the Durango renovations, Red Rock is spending $53 million to upgrade Sunset Station and $200 million to make improvements at Henderson's Green Valley Ranch.  These projects are also completed on schedule and under budget.

Prospective Drivers of Red Rock Stock

Red Rock's stock has risen 31.38% so far this year, making it one of the best-performing gaming stocks overall.  The operator is somewhat burdened by that rally to respond to the question, "What's next?"  More information on the new development at the property level may become available early in the upcoming year.

Steven Wieczynski, an analyst at Stifel, points out that potential drivers of more share price growth are concealed in plain sight.  In particular, it's possible that Red Rock management and the operator's cache of undeveloped land aren't receiving the recognition they merit.

“What we think continues to be overlooked with the RRR story is the value of their undeveloped land,” wrote the analyst in a new report. “We would highly encourage you to look at RRR’s recent investor presentation, which shows their average land holding is worth ~$2M per acre, which to us is well below what investors are currently embedding in the current share price.”