Barry Jonas, an analyst at Truist Securities, is worried that the casino sector has been underperforming. He cited strong gaming fundamentals but said investors are growing increasingly concerned about a potential consumer pullback.
Las Vegas Strip Shows Surprising Strength Amid Investor Worries
In a note to investors, Jonas dismissed concerns about record heat in Las Vegas or the market getting saturated. He preferred MGM Resorts International and Caesars Entertainment, saying the Las Vegas Strip has shown surprising resilience even after the Super Bowl bump, reported CDC Gaming. Caesars’ rates have risen 6% and MGM’s are up 10%, he noted. However, he warned that early visibility for September room rates suggests a softening of prices.
Turning to regional casinos, Jonas said they performed well in June after rebounding in May as the numbers came in generally in line with expectations. Some markets are outperforming others despite investor pessimism following April’s state gross gaming revenue data release, he noted. So far this year high-end players are making up for weak lower-end unrated players and much of the current conversation is M&A driven, particularly around Penn Entertainment.
Caesars Entertainment is struggling on a state-by-state basis due to efficient management of promotions and margins rather than any structural issues, Jonas said.
He believes skepticism on Wall Street over Caesars’ growth prospects is misinformed as the company will eventually benefit from its strategic management of debt and cash flow with new products like New Orleans, Nebraska, Virginia and tribal joint ventures in Oklahoma along with peripheral asset sales.
Barry Jonas Sees Bright Future for Churchill Downs, Expects Bally’s Buyout to Proceed Smoothly
Jonas also has faith in Churchill Downs, he expects improvement at the company’s casinos once skill games are banned. He believes that
Standard General’s buyout offer for Bally’s Corp. would be resolved quickly now that there are no more uncertainties about Bally’s Chicago. Instead of rejecting it in favor of other measures to increase value, he is of the opinion that the board would probably accept the offer.
On Boyd Gaming, Jonas said expectations were “fair” after soft quarters. He sees potential upside in Las Vegas local and downtown, as well as from the reopening of Treasure Chest in Kenner, Louisiana.
Lastly, on manufacturing Jonas mentioned Everi Holdings’ merger with International Game Technology as something to watch.
He was optimistic about Light & Wonder, given the growing demand for its products in Australia, and he also mentioned Gambling.com Group and Inspired Entertainment as stocks he favored without further elaboration.