Thank goodness!
We’ve finally lapped Covid-19, and the performance of gaming companies now will show gains, if only because we’ll be comparing today’s looser Covid restrictions to the tighter restrictions of 2020.
We’ll soon find out if the much-anticipated pent-up demand is there, if many customers remain wary of travel and nights out, and if customers who visited casinos in recent months now go out to reopened movie theaters, ballparks and other forms of entertainment.
So far, early readings and anecdotal evidence are encouraging. In addition to stories about crowded and even boisterous casinos and lines of cars, miles-long, heading to Las Vegas along Interstate 10, there’s statistical evidence of improvement.
As examples, in February Las Vegas Strip RevPAR jumped 44 percent from January, and downtown leaped 68 percent.
Certainly, the stock market has been valuing gaming highly, and not just the sports betting and iGamers that have been the rage during our year-long national quarantine.
Look at the performance of Fantini’s gaming indices vs. broader market indices in the year since the stock market hit its Pandemic Panic low on March 23, 2020:
FANTINI’S GAMING INDICES
Mar 23, 2020 Mar 23, 2021 Percent
North American 42.47 114.5 +169.60
Global Top 30 67.87 148.65 +119.02
Interactive 72.44 248.28 +242.74
Sports Betting 54.12 286.61 +429.58
BROAD MARKET INDICES
Dow Jones IA 18,591.93 32,423.15 + 74.39
S&P 500 2,237.4 3,910.52 + 74.78
NASDAQ 6,860.87 13,227.7 + 92.80
Hang Seng 29,616.13 28,497.38 – 3.78
Gaming stocks outperformed the broader markets by several-fold, across the board.
Perhaps most impressive has been the performance of regional casino stocks, large and small:
Penn National +1,135 percent
Full House + 781
Bally’s + 753
Caesars + 710
Golden Entertainment + 515
Century + 499
Boyd + 383
Red Rock Resorts + 338
Monarch + 229
Churchill Downs + 211
Those stocks outperformed not only the overall market, but their non-regional brethren, such as the much more storied Wynn and Las Vegas Sands.
One reason for their outperformance has been the much-discussed local nature of their customers, who don’t need to fly in. These companies also didn’t have convention business to lose, as did the Las Vegas Strip-centric operators.
Another reason is the proliferation of sports betting and iGaming.
By now, everyone knows the Penn National/Barstool story, or that Caesars is acquiring William Hill, that Boyd owns 5 percent of FanDuel, and that Churchill Downs is transforming its Twin Spires business from just account wagering into full-fledged iGaming. And, most recently, Bally’s has made acquisitions that show it will be as ambitious or more so in growing online as it has been in brick-and-mortar expansion.
As readers of this space know, we’ve been observers of what might be called the second coming of regional casinos. The growth stories of the 1990s, when riverboats popped up in the American heartland, are now the growth stories of the 2020s, as their player databases in so many states become the ultimate competitive weapons in the battle for online players.
One of the best gaming analysts we know is Todd Jordan, managing director and CFO of Hedge Eye Risk Management advisory firm.
Thus, when we sat down with Todd for an Investor Insights video interview to discuss his best ideas, we were interested to hear him describe the dynamics driving companies like Penn National and Boyd. That 20-minute video is well worth a listen. Just click here.
If an investor like Todd Jordan calls regional casino operators among his best ideas, they may still have more to run, even after the amazing past year.
