The world of casino stocks has long been associated with the allure of glittering lights, high-stakes poker games, and the excitement of the craps table. However, beneath the surface, this dynamic industry is undergoing a significant transformation, driven by changing legal landscapes, recovery from the COVID-19 pandemic, and a surge in online gaming.
In this comprehensive guide, we delve into the evolving realm of casino stocks, exploring key trends, and market dynamics, and presenting an in-depth analysis of six top casino stocks to consider in 2024.
The Changing Landscape of the Casino Industry
Beyond the flashing lights and slot gacor slot machines, the casino industry operates as a multifaceted entity, deeply intertwined with the broader spectrum of leisure and hospitality. As a consumer discretionary stock, its performance is closely linked to economic health. The industry faced a severe setback during the COVID-19 pandemic, with lockdowns and travel restrictions impacting casinos worldwide.
However, the resilient nature of the sector is evident in its post-pandemic recovery, fueled by pent-up demand and a return of gamblers and tourists to destinations such as Las Vegas.
MGM Resorts: Diverse Portfolio and Strategic Pivot
MGM Resorts, boasting a market cap of $16 billion, stands out with an impressive collection of properties in key locations, including the iconic Bellagio, MGM Grand, Luxor, and New York-New York on the Las Vegas Strip. The company also holds a 56% stake in two Macau casinos, MGM Macau and MGM Cotai. While MGM Resorts faced a significant stock plunge at the onset of the pandemic, it orchestrated a remarkable recovery, reaching post-financial crisis highs. A strategic investment from IAC/Interactive and a pivot towards online gaming through BetMGM played pivotal roles in this resurgence. The launch of online betting in several states and the introduction of sportsbooks at various properties contributed to the company’s record EBITDAR for its Las Vegas Strip and regional properties in 2022.
Despite challenges in China due to COVID-19-related casino shutdowns, MGM secured a new 10-year gaming license in Macau, securing its future in this lucrative gaming territory.
Las Vegas Sands: Focused on the Asian Market
With a market cap of $42.2 billion, Las Vegas Sands strategically positions itself as a major player in the Asian market, particularly in Macau and Singapore. The company’s portfolio once included Las Vegas, including the Venetian, but it divested its Las Vegas business in 2021 for $6.25 billion. The COVID-19 pandemic posed challenges as traffic to Macau plummeted due to strict lockdowns. Despite these setbacks, Las Vegas Sands remains optimistic about the resurgence of the Asian gaming market as restrictions ease.
While slower to embrace online gaming, the company announced plans in 2021 to become a strategic investor in digital gaming technologies. However, this effort faced hurdles after key personnel leading the initiative departed to establish their gambling investment firm.
Wynn Resorts: Diversified Operations and Global Aspirations
Wynn Resorts, with a market cap of $12.3 billion, operates as a diversified casino operator with 72% ownership in the Wynn Palace and Wynn Macau in Macau. It wholly owns properties such as Wynn and Encore in Las Vegas and the Encore Boston Harbor, which opened in 2019. The company entered the online gaming arena with the launch of Wynn Interactive in October 2020, owning a 97% stake and partnering with BetBull to create an online sportsbook and casino.
Despite initial plans to sell Wynn Interactive to a SPAC in 2021, the deal fell through, and the company faced challenges in 2022, reporting a loss of $98.5 million in adjusted property EBITDAR on Wynn Interactive. However, Wynn remains focused on developing luxury properties and recently announced plans for a resort near Dubai in 2026. Despite challenges, Wynn’s strategic focus on underserved markets positions it for potential growth in the future.
PENN Entertainment: Online Gaming and Strategic Partnerships
PENN Entertainment, with a market cap of $4.5 billion, witnessed a meteoric rise in its stock early in the pandemic, driven by successful ventures into online gambling. With 44 properties across 20 states, the company strategically positioned itself in the online gaming space through Penn Interactive and a 36% stake in Barstool Sports. The strategic partnership with Barstool includes exclusive promotion of its sportsbooks, including Barstool Sportsbook.
The acquisition of theScore, a digital media and gaming platform, for $2.1 billion further solidified PENN Entertainment’s position in online gaming. Despite challenges from the pandemic impacting its casino properties, the company exhibited solid growth through 2020 and 2021, remaining profitable on a GAAP basis. Although profits fell in 2022 due in part to increased lease payments, the company’s focus on online sports betting positions it as a potential winner in the evolving landscape.
DraftKings: Pioneering Pure-Play Online Gambling
DraftKings, valued at $8.6 billion and going public through a SPAC in 2020, distinguishes itself as the sole pure-play online gambling company on this list. With a 27% market share in online sports betting, second only to FanDuel, DraftKings has experienced robust growth, fueled by strategic acquisitions. The $1.5 billion investment in Golden Nugget Online Gaming in August 2021 strengthened its position in online casino games, extending beyond sports betting and daily fantasy sports.
The surge in online sports betting and gambling during the COVID-19 pandemic contributed to DraftKings’ revenue jump of 73% to $2.24 billion in 2022. However, the company continues to operate at a loss, primarily attributed to substantial spending on marketing. With 2.6 million monthly paying users at the end of 2022, DraftKings, while still unprofitable, holds significant potential for growth in the casino industry.
Caesars Entertainment: Balancing Tradition with Innovation
Acquired by Eldorado Resorts in 2020, Caesars Entertainment now stands as the largest casino operator in the U.S. with a market cap of $9.6 billion. Post-merger, the company retained the Caesars name and expanded its portfolio to 54 properties worldwide, including eight on the Las Vegas Strip. While the majority of its business remains rooted in traditional casino operations, Caesars has made strides in online gaming. The acquisition of British online gaming company William Hill Group for $4 billion in April 2021 exemplifies the company’s commitment to diversification. Although the majority of its revenue still comes from Las Vegas and regional casinos, Caesars leverages its national network through a loyalty program, encouraging visits to multiple properties. With a well-balanced approach between traditional and online gaming, Caesars appears poised for future growth, particularly for investors seeking to avoid the uncertainties in the Macau market.
End Note
Investing in casino stocks today involves more than just embracing the glitz and glamour of traditional brick-and-mortar establishments. It requires navigating a complex landscape shaped by online gaming trends, global market dynamics, and the aftermath of the COVID-19 pandemic. As legal barriers to online gaming continue to fall, and traditional casino operators adapt to changing consumer preferences, the industry presents diverse investment opportunities. The six highlighted casino stocks – MGM Resorts, Las Vegas Sands, Wynn Resorts, PENN Entertainment, DraftKings, and Caesars Entertainment – offer unique propositions for investors seeking exposure to the dynamic and evolving world of casino investments. Investors must conduct thorough research, consider the risk factors, and stay attuned to industry developments to make informed investment decisions in this high-stakes sector. The casino industry’s resilience, adaptability, and potential for innovation make it a compelling arena for investors looking to ride the wave of change in the world of entertainment and leisure.
Featured Image: Pixabay
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