VICI Upgraded to Strong Buy as Acquisition Masks Tenant Concentration Risks

What happened

A Seeking Alpha article upgrades VICI Properties to Strong Buy, praising its compelling yield and valuation near historical lows despite record revenues and raised guidance. The upgrade emphasizes the Golden Portfolio acquisition, which diversifies cash flows with stable Las Vegas exposure and delivers an attractive 7.5% cap rate with built-in rent escalators. However, DeepValue's master report underscores that VICI remains heavily reliant on Caesars and MGM for 74% of rent, with Las Vegas visitation declining 7.3% in 2025 and tenants facing EBITDAR pressures. While VICI boasts 100% rent collection, mid-single-digit AFFO growth, and a solid balance sheet, the market's bullish sentiment overlooks underlying vulnerabilities like potential rent concessions or CECL increases. Investors must balance the optimistic narrative against persistent risks in tenant credit and cyclical leisure demand.

Implication

The Seeking Alpha upgrade highlights VICI's near-term strengths, but investors must recognize that its valuation discount reflects real risks from tenant dependence and market cyclicality. While the Golden acquisition provides diversification, it does not eliminate the core threat of rent restructurings if Caesars or MGM face sustained weakness. VICI's triple-net leases and escalators support a base case of 4-6% annual AFFO growth, yet any material concession from major tenants would break the thesis and pressure dividends. Monitoring 2026 guidance for AFFO growth and tenant credit trends is critical, as the stock's upside to ~$36 in bull scenarios hinges on tourism stabilization and deal execution. Position sizing should account for a 25% bear case probability where regional gaming softness triggers lease amendments, driving shares toward the mid-$20s.

Thesis delta

The upgrade reinforces VICI's value proposition from contractual growth and accretive deals, but it does not alter the fundamental thesis, which already balanced these positives against tenant and Las Vegas risks. However, it signals increased market optimism that may narrow the valuation discount if 2026 guidance confirms robust AFFO growth without rent concessions, though the delta is limited until tenant credit health improves.