(AsiaGameHub) – In February, Truist Securities analyst Barry Jonas shared his perspective on early-year gaming stocks, noting their continued weakness due to investor wariness around prediction markets, even as the broader gaming market shows steady patterns.
In a new note dated April 21, the analyst restated his view: gaming stocks continue to be unpopular with investors, although initial indications of steadiness are emerging in some industry segments.
Jonas detailed that the most difficult environment persists in Las Vegas, where the Strip is grappling with limited growth and casinos catering to local residents are dealing with short-term, unique issues.
Jonas contended that regional casino operators, favored by patrons staying nearer to home, “have the best setup” going into first-quarter earnings reports. He highlighted Churchill Downs and Monarch Casinos & Resorts as his preferred picks.
Online Gambling, Less Stable
Jonas added that online gambling “remained challenged,” positioned between the growth of online sports betting and the emergence of prediction markets. Wider economic and oil price worries are also dampening investor mood toward gaming stocks.
Major events failed to significantly boost Las Vegas’s results. A sizable CON/AGG exposition with 140,000 attendees had minimal impact on improving cash flow for the Strip.
Jonas observed that hotel occupancy and tourism hit their lowest point in the first quarter, although revenue per available room increased by 5%.
Nevertheless, he highlighted persistent weakness in leisure travel. “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 stated.
Operators Are Adjusting
To tackle pricing worries, Caesars Entertainment and MGM Resorts International have launched value-focused hotel packages.
“Still, it remains to be seen what sort of upside this will yield,” Jonas continued, emphasizing that second-quarter performance will be key to monitor.
Las Vegas hotel rates have been volatile, declining early in the year, rising in March, falling once more in April, and then recovering in May and June.
Discussing corporate moves, Jonas mentioned Caesars’ stock, which is being influenced more by buyout rumors than by its core business health.
“We see any such deal as complex, given the elevated leverage of parties involved,” he remarked, noting that regulatory oversight would probably be intense.
Regional Casinos Stand Firmer
Station Casinos is under temporary strain from refurbishments, and Boyd Gaming is reporting varied outcomes at its travel-focused properties. However, local demand is consistent, bolstered by new projects such as Cadence Crossing.
Jonas also identified more robust regional players like Penn Entertainment and Boyd, in addition to Monarch and Churchill Downs. He suggested the Kentucky Derby might contribute an extra $15 million to $20 million in cash flow.
Amid wider market doubts, Jonas attributed regional resilience mainly to “continued trade-down activity amongst consumers,” even while Las Vegas trails.
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