Some casino stocks are moving as investors focus on sports betting and the economy reopening. However certain key names are lagging.
Penn National Gaming (PENN) led the rally with a 13 percent gain. It jumped into sports betting by moving to acquire David Portnoy’s Barstool Sports on January 29. That gave it a foothold in a new industry opened up by a Supreme Court decision in 2018.
Investors are now anticipating the launch of a betting app in the third quarter. That will likely be a key subject on the company’s second-quarter earnings report next Thursday, August 6.
Another big catalyst has been a rebound in casino visits as the economy reopens from the coronavirus pandemic. Boyd Gaming (BYD), which operates in places like Las Vegas, Illinois and Missouri, announced some big upside surprises this week.
“We are off to an excellent start” since opening began, BYD CEO Keith Smith said in his quarterly report. “While overall visitation and revenues are down, spend per visit is robust.” He added that “these positive operating trends are continuing into July, giving us confidence that we can sustain increased efficiencies in our operating model.”
BYD’s earnings and revenue both beat estimates. Smith also highlighted the company’s shift toward online gambling and a sports-betting partnership with Fanduel.
In a separate but related story this week, Nevada’s government reported a gaming win of $567 million for June. That’s down 45 percent from last year, but up more than 95 percent from May.
It was also good news for PENN, which said on July 10 its U.S. casinos would reopen soon. Other gainers were Caesar’s Entertainment (CZR) — big in Las Vegas — and slot-machine maker Scientific Games (SGMS). CZR reports earnings on Aug. 6.
While casinos are rebounding in the U.S., firms exposed to the Chinese gambling hub Macau are dead in the water:
- Wynn Resorts (WYNN)
- MGM Resorts (MGM)
- Melco Resorts (MLCO)
- Las Vegas Sands (LVS)
“There’s not much hope for the casinos to come back” under China’s current travel rules, an LVS executive told Reuters last week.
This represents a big change for casino investors. For years, Macau was the big growth area. But now the domestic market is surging back to life as lockdown-weary Americans return to the Strip. And investors see even more opportunities as gambling goes online and sports betting takes off.
Finally, don’t forget about Draft Kings (DKNG). The sports-betting firm more than tripled between April and June before pulling back. It’s spent the last two weeks consolidating at its 50-day moving average. DKNG’s earnings are due Aug. 14.