It’s no secret that gaming stocks have sold off, in many cases worse than the overall market, as they suffer from being consumer discretionary plays even though their business is booming, at least in the U.S.
And it doesn’t matter which sector of the gaming industry they occupy. The big cap casino stocks—Las Vegas Sands, Caesars, MGM Resorts, Wynn—are down 34 percent year-to-date as of this writing.
The once-hot sports betting and iGaming stocks, like DraftKings and Rush Street Interactive, are down 51 and 65 percent, respectively, and they are down much worse from their all-time highs.
Even companies expected to make money from the growth of digital wagering such as sports data providers and affiliates are way down. Genius Sports dropped 66 percent this year, Sportradar 55 percent, Better Collective 31 percent and Catena 25 percent.
Gaming suppliers are down an average of 29 percent year-to-date. Even the reliable U.S. regional casino stocks are down an average of 32 percent.
Two companies bucking the trend are Flutter and SciPlay, both dead even for the year. London-listed Flutter owns 95 percent of FanDuel, which is running first or second in market share in U.S. sports betting jurisdictions and has its profitable U.K. operations to provide support. SciPlay has the support of majority owner Light N Wonder, formerly Scientific Games. However, the social gamer isn’t a pure winner. The stock is down 37 percent from its all-time high.
Nor are the declines simply from a COVID reaction and/or a lousy current market. The three big Las Vegas-Macau glamor names have been losers for years. Wynn is down 76 percent from its high eight years ago; Las Vegas Sands is minus 79 percent since its high nearly 15 years ago; and MGM Resorts is off 65 percent since its peak way back in 2007.
And if you want a nearly-pure Macau play traded in the U.S., Melco Resorts is off 89 percent from its February 2014 peak.
Of course, the question isn’t where the stocks have been, but where they are going. Related to that, are the big declines indications that they have been oversold and represent buying opportunities now?
There is not enough space here to analyze each company to provide answers. And there is no reason that continued or worsening inflation and/or a following recession won’t swamp all stocks. No one knows if the recent stock sell-off in the overall market is nearing an end or just beginning.
Our bias is to say that the brick-and-mortar casino industry presents a lot of buying opportunities now. Current and near-future business volumes are healthy, and there will be a time when today’s difficulties are behind us. Certainly, the lessons learned in managing costs during the COVID lockdowns creates efficient operators who can manage a downturn.
Likewise, games suppliers get to ride the wave of a healthy and growing casino industry. One interesting company is Everi, which gets to ride the wave of growth on both its games and FinTech sides.
The digital companies are another matter, not because digital isn’t growing, but because the pure play digitals might have difficulty surviving the roller coaster ride. In that regard, companies with strong brick-and-mortar businesses, whether that be Caesars or MGM among operators or Aristocrat or Light & Wonder among suppliers, may be the best digital plays. And with their financial strength, they can be positioned to pick up any digital companies that fall.
