These Are the Casino Stocks Best Positioned for a Gaming Recovery
Las Vegas Sands and Wynn Resorts are best positioned to lead the gaming industry’s recovery, according to UBS. The firm says LVS’s and WYNN’s higher Macau exposure relative to its peers gives the two casinos a headstart in returning to 2019 revenue levels. UBS estimates are as follows:
Macau revenues to recover to 2019 levels by 2021.
Regional revenues to recover to 2019 levels by 2023
Vegas revenues to recover to 2019 levels by 2024
Unlucky Vegas: Las Vegas is expected to experience the slowest recovery due to its reliance on air traffic and large gatherings such as conventions. UBS singled out Caesars Entertainment, predicting the company will experience the slowest recovery due to its primarily domestic exposure. 93% of Caesars’ 2019 revenue was generated between Regional and Vegas, while 0% was generated in Macau. On the other hand, LVS and WYNN generated 63% and 70% of 2019 revenue in Macau, respectively.
Phase 1 of the reopening: Louisiana casinos began to open on May 18th and Mississippi casinos started to open on May 21st. On Wednesday, May 27, Wynn Resorts announced it will reopen both Las Vegas hotel towers, the casino, and all of its restaurants on June 4. MGM also said it will open begin to reopen on June 4.
Sports betting and iGaming: John DeCree, analyst at Union Gaming, says in a recent report that the outlook for sports betting and iGaming is “better than ever” due to the expectation of broad acceptance of sports wagering in the U.S. over the next two years. DeCree added that “now with the need for state tax revenues increasing and the success of online gaming platforms throughout the pandemic, we see this acceptance accelerating.” Digital gaming stocks benefiting thus far include DraftKings, Flutter, and SciPlay.
Big Picture: While casinos are beginning to open their doors, it is expected that the companies will take a phased approach. Additionally, uncertainty related to the COVID-19 outbreak and the resulting economic damage remains high. Casinos with more diversified regional exposure have reduced risk to economic disruption or a “second wave.”
