Gaming Stocks Lag As Regional Casinos Show Steady Strength

In February, Truist Securities analyst Barry Jonas expressed his view on early-year gaming stocks, saying they remained weak amid investor caution toward prediction markets, despite consistent trends in the gaming market.

In a fresh April 21 note, the analyst reiterated his opinion: gaming stocks keep sitting out of favor with investors, though early signs of stability are visible across parts of the sector.

Jonas explained that the weakest conditions are still centered on Las Vegas, as the Strip struggles with growth and locals-focused casinos face short-term “idiosyncrasies.”

Jonas argued that customers looking to stay closer to home benefit regional casino operators who “have the best setup” heading into first-quarter earnings calls. The analyst emphasized Churchill Downs and Monarch Casinos & Resorts as names he prefers.

Online Gambling, Less Stable

Jonas further explained that online gambling “remained challenged,” caught between expansion in online sports betting and the rise of prediction markets. Broader concerns about the economy and oil prices are also weighing on sentiment across gaming stocks.

Even large events did not manage to fully lift Las Vegas performance. A major CON/AGG exposition with 140,000 attendees did little to improve the Strip’s cash flow. 

Jonas noted that occupancy and tourism bottomed in the first quarter, while revenue per available room rose 5%.

Still, he pointed to the ongoing softness in the leisure travel field. “We don’t think it was enough to offset overall softness in the leisure segment with the well-known challenges at the low end, softer international visitation and value-perception issues,” Jonas said.

Operators Are Adjusting

Caesars Entertainment and MGM Resorts International have introduced value-focused hotel packages to help address pricing concerns. 

“Still, it remains to be seen what sort of upside this will yield,” Jonas added, noting that second-quarter trends will be important to watch.

Hotel pricing in Las Vegas has been uneven, with rates softening early in the year, improving in March, then dipping again in April before rebounding in May and June.

When speaking about corporate activity, Jonas referred to Caesars’ shares, which are being driven more by takeover speculation than fundamentals. 

“We see any such deal as complex, given the elevated leverage of parties involved,” he said, adding that regulatory scrutiny would likely be heavy.

Regional Casinos Stand Firmer 

Station Casinos is experiencing temporary pressure from renovations, while Boyd Gaming is seeing mixed results at its destination properties. Still, local demand remains steady and supported by new developments like Cadence Crossing.

Jonas also pointed to stronger regional operators such as Penn Entertainment and Boyd, along with Monarch and Churchill Downs. The Kentucky Derby, he said, could add $15 million to $20 million in cash flow.

Despite broader uncertainty, Jonas said regional strength is largely driven by “continued trade-down activity amongst consumers,” even as Las Vegas continues to lag behind.