While the popular stock indices have been hitting new highs, the recovery of gaming stocks has been muted, except for the sports betting/iGaming plays.
A few examples: Caesars and MGM Resorts are still 35 percent off their highs, while Boyd is down nearly 30 percent. Major suppliers IGT and Scientific Games are also down in the 30 percent-plus range.
The key to stock market success in recent weeks and months has been to have a good sports betting/iGaming story. To some investors, Penn National isn’t a regional casino operator like Boyd, it’s a red-hot sports betting play, because it owns 36 percent of Barstool Sports.
Never mind that Barstool is basically a blog, albeit a highly successful one. PENN has ambitious plans for capitalizing on Barstool’s audience and platform. But running up the stock price to new highs is a little like, to use an old gambling expression, betting on the come.
A sampling of other sports gambling related stocks hitting recent highs:
- London-listed Flutter, which will exploit the American opportunity through subsidiary FanDuel
- Australian software provider PointsBet, up sevenfold since its IPO last year
- GAN, nearly triple its May IPO
- Stockholm-listed platform provider Kambi, discovering new territory to conquer in the U.S.
- Churchill Downs, which has betting platforms to go along with its racing and casino businesses
All that aside, brick-and-mortar operations will be the primary source of profits for most casino companies for a long time, if not forever.
So far, the decline in casino stock prices, minus those sports-juiced exceptions, are in line with the decline in revenues being generated by physical casinos.
July gave us the best picture of the casino industry as the first month in which almost the entire U.S. industry had reopened.
Final July figures aren’t available as of this writing, but most jurisdictions have reported. Here’s a sampling:
Ohio $181.068 million +11.62 percent
Mississippi $195.036 +5.97
Iowa $122.621 -1.95
Indiana $160.987 – 5.11
Louisiana $177.624 – 9.90
Nevada $756.793 – 26.16
Illinois $82.617 – 28.63
New Jersey $263.629 – 21.12
Pennsylvania $219.721 – 22.79
As you can see, there’s a lot of difference, but take out Nevada and states with large major cities—Illinois, Pennsylvania and New Jersey, which draws from New York City and Philadelphia—and the numbers aren’t bad, given the pandemic and capacity restrictions. They suggest that casinos can fully recover.
Nevada exemplifies the gap between destination markets and convenience markets. Las Vegas Strip revenues dropped 39.19 percent in July and would have declined even further except for very high hold at the baccarat tables. But the Las Vegas locals market fell only 8.23 percent.
Other Nevada markets also did much better than the Strip, such as Washoe County (Reno-Sparks), down just 7.45 percent, and Laughlin, down 16.95 percent.
There are still a lot of questions to be answered: Will we have an economic recession in coming months? Will Covid combine with flu season to set back the whole U.S.? How will casinos fare as other forms of entertainment reopen?
But for now, it appears casino customers are still there and will be back.
