After some 12 months, it appears that the Covid-19 pandemic is finally starting to become a thing of the past in the United States. A recent CNBC analysis suggests that average daily cases are down significantly in 43 states. That bodes well for gambling stocks and the industry in general, which has taken a hammering over the past year.
With more people feeling safe about visiting brick-and-mortar casinos, the industry will witness healthy revenue growth. Its been a torrid year for the gambling industry, to be sure. However, with huge pent-up demand, I expect things to pick up from where they left off in 2019.
Of course, online betting has been growing substantially. But now it’s time for the brick-and-mortar casinos to make a comeback. After all, the global gambling industry is set for growth in excess of 10%, from nearly $466 billion in 2020 to some $516 billion in 2021.
- MGM Resorts International (NYSE:MGM)
- Las Vegas Sands (NYSE:LVS)
- Caesars Entertainment (NASDAQ:CZR)
- Boyd Gaming (NYSE:BYD)
- Red Rock Resorts (NASDAQ:RRR)
- Golden Entertainment (NASDAQ:GDEN)
- Penn National Gaming (NASDAQ:PENN)
Gambling Stocks to Buy: MGM Resorts International (MGM)
Shares of MGM Resorts have recovered well after bottoming out below the $10 mark at the beginning of the pandemic. Now, though MGM stock continues to lose money, its operations in places like Las Vegas are gradually coming back.
Despite owning several properties on the Las Vegas Strip, MGM’s regional operations are what have really shown some potential among the company’s properties. Over the course of 2020, revenues from the regional businesses slowed less than MGM’s Las Vegas ones. Additionally, the company’s Macau properties should take off once travel restrictions are less strict in Asia. If MGM can get Macau back up and running, it should be able to get back to its winning ways.
Currently, though, the company’s most promising business is its online gambling segment. MGM generated $178 million from the business last year and is expected to double that number this year. Therefore, with multiple growth catalysts, MGM is one of the more dependable gambling stocks at this time.
Las Vegas Sands (LVS)
Las Vegas Sands has been in the news of late. Why? Recently, it sold its Las Vegas resort to Apollo Global Management (NYSE:APO) for $6.25 billion. Though that may come as a shock to most people, it’s a move that lets the company focus on its more fast-growing business segments. Now, LVS can aim its attention solely on its Asian properties. It can also focus on its plans to move into the online gambling and sports-betting realm.
In 2019, LVS’s EBITDA from its Asian business segment totaled more than $4 billion. Over the same period, the company generated only $487 million from Las Vegas. In fact, its business in Las Vegas has struggled for quite some time now, which is why the sale is understandable.
Moreover, this pick of the gambling stocks could also be boosted by the company’s possible push into online gambling. Coming off the loss of CEO Sheldon Adelson, acting CEO Robert Goldstein is “in the early stages of talks” about using the Sands brand for an online platform.
All in all, with a more streamlined business, LVS stock could be headed for significant gains this year.
Caesars Entertainment (CZR)
Casino giant Caesars Entertainment has been on a roll in the past few months. For one, it completed its Eldorado Resorts merger, which helped it grow revenues to nearly $3.5 billion in 2020.
However, that’s not the only move the company has made. Back in October, for example, CZR also acquired an online gambling partner, William Hill, for $3.7 billion. On top of that, the company has invested in Superdraft as way to foray into the world of fantasy sports betting.
In the past, CZR stock has had a rough go of things, struggling to evolve and expand its business. Now, though, it has made some massive strides in increasing its market share in the industry. Naturally, Covid-19 impacted its revenues in 2020, but bookings for 2021 are picking up nicely. In fact, bookings in the second half of the year are already 32% higher than they were in 2019.
Therefore, with a super-charged business portfolio, this one of the gambling stocks could make a big splash this year.
Boyd Gaming (BYD)
Boyd Gaming is one of the best-managed companies in the gambling business. Through its management’s effective belt-tightening efforts, it was able to post a profit in the last two quarters of 2020, with operating income of $127 million and $111 million in Q3 and Q4, respectively. Additionally, with broad geographical diversity, the company will likely recover well in the post-pandemic world.
Of course, the pandemic has been tough for every company in the gambling business, but some names have done better than others. For BYD, management has done incredibly well in managing costs and expanding margins during the era of the novel coronavirus. Therefore, with the re-opening of the economy, it has set itself up for a faster-than-expected rebound.
BYD has even partnered with online fantasy sports and gambling company Fanduel, with which it is rebranding online casinos in New Jersey and Pennsylvania under Boyd’s Stardust brand name. Hence, BYD stock is one of the best recovery plays among the gambling stocks at this time.
Red Rock Resorts (RRR)
Similar to Boyd Gaming, Red Rock Resorts is another company that has done a stupendous job in taming the effect of Covid-19 on its business.
For one, its properties were able to attract customers in the second half of 2020 while most Las Vegas strip casinos continued to struggle amidst rising novel coronavirus cases (Page 3). This is not to say that RRR wasn’t hit by the pandemic — it was. However, the company is led by seasoned casino owners — in particular, Frank and Lorenzo Fertitta — who were well-versed with the business’ ins and outs. As a result, RRR stock is up more than 29% in the past year.
Of course, the Las Vegas Strip has suffered immensely during the pandemic. Recovery is expected to be sluggish. However, local resorts and casinos such as Red Rock are less dependent on convention business and more dependent on local customers. They also tend to have lower fixed costs.
All in all, with its effective Covid-19 protocols and cost management, this one of the gambling stocks represents the cream of the crop in its sector.
Golden Entertainment (GDEN)
Shares of Golden Entertainment have been rallying after a relatively strong showing in the fourth quarter. Moreover, Union Gaming believes that — with GDEN stock trading at just 20% free cash flow (FCF) yield at one point — it’s one of the best value plays in the sector. In fact, GDEN is one of the few companies that didn’t need external capital during the pandemic, with one of the industry’s leanest balance sheets.
Similar to RRR, Golden Entertainment has a strong portfolio of regional casinos in Las Vegas. This is largely why the company has done so well in recovering from the crippling effects of Covid-19 when compared to its peers. It even surpassed analyst estimates on revenues in Q4, despite the external environment’s challenges.
So, with its superior management, liquidity and protocols, this pick of the gaming stocks is poised for a strong showing in the post-pandemic world.
Penn National Gaming (PENN)
The last name on this list of gambling stocks, shares of Penn National Gaming have been on a tear in the past year, primarily due to its moves in the online gambling world.
Most notably, PENN purchased a 36% stake in Barstool Sports and is working on its Sportsbook application to move into the sports gambling business. Additionally, with several regional casinos, Penn National’s land-based casino business hasn’t been as hampered as its peers.
Compared to 2019, the company’s revenues for 2020 fell just 32.5% to $3.57 billion. That’s a commendable performance, considering the effects of the pandemic.
A lot of that success is down to the company’s casinos being located in places with less stringent restrictions. Additionally, the online gambling business behind PENN is booming. The company’s revenues from “other sources” were up from $15.6 million in Q4 2019 to $53.4 million in the same period in 2020.
With multiple tailwinds across its business segments, PENN stock should be in a great position this year.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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