Does the jump in gaming stocks since the start of the third quarter earnings season mean their brutal bear market is over?
Or have gamers just rebounded with the overall market in what, to use one of Wall Street’s more colorful expressions, might be a dead cat bounce on the way to a prolonged downturn?
Time, of course, will tell. But there are some signs of hope.
One sign is the earnings themselves. Most companies have been either reported higher revenues than expected third quarter earnings or provided bullish outlooks.
In some cases, analysts shaved target prices for stocks citing reasons independent of business conditions, such as concerns that some companies might not be able to cut costs as fast as earlier anticipated on properties they are purchasing or have recently bought.
There is also the practice after stocks have well over- or undershot forecasts to bring target prices closer to actual market values.
If there is an about-face in investor sentiment, IGT might have been the spark to light the flames.
IGT beat earnings and revenue estimates and slightly raised EBITDA guidance. That was all the market needed. Shares skyrocketed 15.87 percent. More important, IGT took its fellow gaming technology companies along with it as Scientific Games soared 10.91 percent and Everi and AGS, which had not fallen as far, enjoyed 4.20 and 2.93 percent gains.
Further, gains continued the next day, with the stock prices of all four companies up, though by more modest low single digits.
Casino operators also turned on a dime.
Macau casino operators had been beaten down as double-digit revenue growth stopped in October and analysts began to forecast flat revenues ahead. Then, October provided a 2.6 percent revenue increase. That was modest, but it was all that it took for Las Vegas Sands to soar 11.82 percent, Wynn 11.96 percent, and Melco 12.45 percent.
Nor did U.S. regional casino stocks miss out on the party. On a day when Penn National reported mixed results and dipped 1.65 percent, the others jumped:
- Churchill Downs 8.43 percent
- Red Rock Resorts 8.34
- Boyd Gaming 6.97
- Golden Entertainment 6.05
- Eldorado Resorts 4.63
- Monarch 2.71
Just how badly gaming stocks have been devastated is illustrated by Fantini’s Gaming Indices. Our North American index plunged 14.17 percent in October, bringing it down 27.24 percent year to date. The World index dropped 15.28 and 30.31 percent, and Interactive 23.10 and 19.91 percent.
And individual stocks still have a long way to go to get back to their old highs. For example, Scientific Games is 63 percent below its high, IGT 39 percent, Wynn and Melco more than 40, and Penn National 35. Las Vegas Sands and Boyd being down just under 30 percent are strong by comparison. Other gaming stocks tell the same tale.
As mentioned, this could be a bounce in a bear market. Or those standing on the sidelines might look back a few months from now asking how they missed a big buying opportunity.
Mark Frissora
The announcement that Mark Frissora will leave as CEO of Caesars Entertainment in February came as a mild surprise.
Frissora came to Caesars with a history as a highly effective CEO at Tenneco and Hertz for over 14 years.
He quickly focused on giving Caesars the kind of strong management leadership it had lacked for a number of years.
But Caesars also had become a target for activist investors wanting to sell or break up the company to unlock its value.
Frissora’s departure may suggest those investors have gained sway and the company will be put into play in some fashion. Regardless, Mark Frissora brought leadership at a time Caesars needed it.
