For a long time now, we’ve measured stocks by pre-COVID and post-COVID.
That generally has worked well, but the comparisons are getting less meaningful each day as we’re now five years past COVID and the more meaningful measure is where we go from here.
Given all of the turmoil over tariffs and other new and proposed policies and their impact on the future of the economy, the new measuring dates might be pre-Trump and now.
Gaming stocks have been mixed since Trump took office. The big Las Vegas casino operators are about flat, suppliers are mostly up and more digital stocks are down than up.
The one group with clear direction is regional casino operators. They are down, several by double digits and some, like Las Vegas-centric Golden Entertainment and Red Rock Resorts, both at 52-week lows. Joining them on the new low list is Churchill Downs, a company with a proven growth record that may be paying the price of its valuation migrating towards its lower-valued peers in a pressured market.
Regional casino operators are facing a tough go because many investors fear that the “Trump Tariffs” will result in a recession that will hit consumer discretionary stocks hard. See sales declines reported recently by retailers for possible evidence of that.
Gaming revenue being hit in a recession makes sense, though that thinking differs from the once popular notion that people will continue to gamble even in hard times. They might, though the continued double-digit growth of online sports betting and iGaming suggests that they will be doing so on their phones from home, not in high-overhead casino buildings.
In other words, don’t be surprised to see brick-and-mortar casino revenue take a hit this year. That already appears to be happening given the generally weak revenue reports recently issued by various states. In a full-blown recession, declines may become significant.
Don’t expect Las Vegas to be exempt. As we’ve mentioned before, the convention business is vulnerable to recession. And, as Las Vegas has become more expensive and is more non-gambling oriented, it may act more like other consumer discretionary industries where customers cut back spending. Nor can we completely ignore any impact of anti-American attitudes building among the city’s biggest source of foreign visitors, Canadians. More insults by Trump aimed at our “51st state” are certain to alienate a significant number of prospective visitors.
However, there are opportunities in casino stocks. Regional casino valuations are ridiculously low. Lower profits will bring stock prices down even further. In other words, a patient investor can get some slam-dunk winners today, and perhaps at even better prices tomorrow.
This should be especially true of Red Rock and Golden as the former has a clear growth plan and both will benefit long-term from the seemingly inexorable population growth of the Las Vegas Valley.
Finally, there are the digital plays. Prices have been coming down. Flutter, Rush Street Interactive and Gambling.com Group have fallen double digits since inauguration day even though they are growing businesses in a growing sector.
In summation, there are opportunities for long-term gaming stock investors despite, and in some cases perhaps because of, Trump 2.0.
