So, where do gaming stocks stand in this new, chaotic world of higher tariffs and threats and counter-threats over them by seemingly every country?
If you thought they’d be somewhat insulated because of the fact that casinos don’t trade in goods and online operators enjoy still-growing markets, you’d be wrong, at least by initial investor reaction.
Gaming stocks sold off as badly or worse than any retailer or car company on the day after the Trump Tariffs were announced. One reason is guilt by association. They are in the consumer discretionary sector, after all, and a lot of funds buy and sell stocks on computer models that don’t differentiate between a Nike making shoes overseas and a Churchill Downs generating all of its revenue at home.
Here are some numbers from The Day After: the Nasdaq sold off 5.97 percent and the Russell 2000 plunged 6.59 percent.
What might be called the Big Four (Las Vegas Sands, MGM Resorts, Wynn and Caesars) fell 9.04 percent. Nevada-facing locals operators (Red Rock Resorts, Golden Entertainment, Boyd Gaming and Monarch Casino) fell 5.97 percent.
Even seven online stocks representing a cross-section of the space (DraftKings, Flutter, Rush Street Interactive, SportRadar, Genius Sports, Gambling.com Group and Bragg) fell an average of 5.39 percent. Some other precipitous losers were Penn Entertainment down 10.02 percent and Full House Resorts 14.15 percent.
And there could be more bad news ahead. Even the most domestic of gaming operators will be negatively affected if the tariff chaos and its aftermath lead to economic recession. That would be especially true of Las Vegas casinos, which can also expect a drop in international visitation if Canadians and others decide they’d rather spend their vacation and entertainment dollars in a country where they feel welcome. And further jacking up parking and resort fees isn’t likely to endear operators to domestic customers, either, taking price gouging off the table as a revenue raiser.
But, as always, crises can bring opportunity, especially to the patient. Viewed from that perspective, gaming can outperform and even generate good returns for investors over time.
Let’s look at two of our long-time favorites, the gaming REITs. On The Day After, they far outperformed with Gaming & Leisure Properties slipping just 2.25 percent and Vici Properties only 0.53 percent.
Further, in a time when interest rates are falling and likely to fall more, their dividends alone are attractive. GLPI’s dividend currently yields 6.15 percent and VICI’s 5.37 percent.
And, with rock solid rents, they are likely to maintain and even grow profits even if others decline in a recession.
Another classic lesson during bear markets is to seek out best-in-class. Among gaming operators, that could include Wynn in the destination resort space and Red Rock among Las Vegas locals. Both have more affluent, thus more recession-resistant, customers than their direct competitors. Each also has growth kickers—Wynn with its multi-billion UAE project and Red Rock with its Durango expansion, Las Vegas Valley growth plan and the long-delayed North Fork Rancheria project in California.
Likewise, several regional casino operators combine operational excellence with beaten-down valuations. Finally, if a recession comes, one can expect more states to legalize online gambling to boost tax revenues, thus boosting iGamers.
In summary, we can’t predict what the next days, weeks or even year will bring, but the right gaming stocks present opportunities.
