Monarch Casino & Resort, Inc. (MCRI) shares rose nearly 20% during Monday's session after Stifel upgraded the stock from Hold to Buy and issued a price target of $42.00 per share, representing a premium of approximately 50%.

The COVID-19 outbreak has temporarily closed the company's resort operations, but analyst Brad Boyer believes that the current valuation reflects "the baby getting thrown out with the bath water," as investors appear to be ignoring Monarch's superior leverage profile, strong end markets, outright real estate ownership, and compelling intermediate-term cash flow growth.

In addition, the analyst believes that Monarch's savvy management team will be able to leverage its flexible capital structure on the other side of the pandemic to acquire assets from financially distressed operators opportunistically at compelling multiples to improve its bottom line.

The move comes shortly after Union Gaming analyst John DeCree shared similar sentiments on April 24. DeCree believes that Monarch stock's pullback represents a great opportunity for investors and that the company has ample liquidity to weather the storm and emerge in a favorable position to be opportunistic.

Chart showing the share price performance of Monarch Casino & Resort, Inc. (MCRI)
TrendSpider

From a technical standpoint, the stock broke out from trendline resistance toward the 50-day moving average at $32.33 during Monday's session. The relative strength index (RSI) remains neutral with a reading of 59.14, but the moving average convergence divergence (MACD) continues to trend higher toward the zero line. These indictors suggest that the stock could have more room to run over the coming sessions.

Traders should watch for a breakout from the 50-day moving average toward Fibonacci resistance at $40.47 or the 200-day moving average at $42.72 over the coming sessions. If the stock fails to break out from the moving average, traders could see a move lower back into its price channel to retest reaction lows and Fibonacci support near $23.38, although that scenario appears less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.