We’re nearing the mid-point of 2017, which means it’s an appropriate time to take a look at what gaming stocks have done so far this year. Below are selected stock price changes year-to-date as of this writing, June 7, compiled by Blake Weishaar of the Fantini Research staff.
COMPANY Percentage Change
INTERNATIONAL/US CASINO OPERATORS
Wynn Resorts +52.94%
Caesars Entertainment +50.00
Las Vegas Sands +19.57
MGM Resorts +13.76
REGIONAL US CASINO OPERATORS
Penn National +47.28%
Pinnacle +42.83
Golden Entertainment +41.37
Boyd Gaming +28.06
Eldorado +21.60
Monarch +19.82
Churchill Downs +15.59
REITS
Gaming & Leisure Props +19.63%
MGM Growth Properties +11.02
MAJOR SUPPLIERS
Everi +217.97%
Scientific Games +81.43
Aristocrat +44.84
IGT -27.78
MACAU CASINO OPERATORS
Melco Resorts +44.65%
Wynn Macau +42.63
Galaxy Entertainment +35.95
SJM +25.82
Sands China +4.01
MGM China +0.5
Two reactions:
Based on the numbers above, the response is: Wow! Look how far gaming stocks have advanced in less than six months.
The second response is: Whoa! How much farther can they go in the second half? Or do they even retreat?
To attempt to answer that question for every company listed would take far more space than allotted here. But this we can say, using an old Wall Street aphorism: Trees do not grow to the sky.
Having said that, here are some general observations:
Stocks of the big international casino operators mostly have been driven by the happy combination of Macau recovery and Las Vegas prosperity. The exception is Caesars, which is coming out of bankruptcy and into the light of day for investors who now know what CZR will look like financially after it completes its reorganization in September or October.
We have some concerns about Macau. There seems to be a bit of amnesia creeping in. Investors who got burned by the policies of the Communist Mainland government seem to be slipping back into the mindset that the sky’s the limit as Macau has barely scratched the surface of the Chinese market. And still-to-open MGM Cotai and Lisboa Palace have yet to open and add another capacity absorption challenge.
We aren’t going to reprise all our cautions from the last time that mentality set in. But we will advise: Be cautious. Dictatorial governments can, and do, change policies unexpectedly. China is still a Communist government, and gambling is still anathema to the Communist ideology.
This doesn’t mean we’re bearish, but a it does mean we’re alert to hints of change, and not fully invested in Macau.
Now, the exception, Caesars. We admit to being fans of CEO Mark Frissora. After years of the company being run by a college professor clearly not interested in casinos, CZR is being managed by a businessman. Frissora has shown he understands what’s needed to make Caesars productive again. And with the greatest number of properties of any casino company and with the giant Total Rewards player database, CZR might outperform.
Regional casino companies. For a variety of reasons, many of which have been explained to the premium subscribers to Fantini Research, we like almost every company in this group. If you want to know which companies and why, send an email to me at fantini@fantiniresearch.com.
Gaming Suppliers. My goodness, has Everi surprised. Given up almost for dead just a few months ago, the stock is now up multi-fold. The lesson here, don’t underestimate a company that has a big recurring revenue base in its payments business, good new products and lots of geographical growth opportunity in slot machines, and a seasoned in every way CEO in Mike Rumbolz.
Then there is Scientific Games reaching new high after high. Investors apparently believe CEO Kevin Sheehan will perform the turn-around at SGMS that he accomplished at Norwegian Cruise Lines, even with debt 8 times EBITDA.
