Now that the second-quarter earnings season is mostly over, we can look at investor reaction to gauge the sentiment—and perhaps near-term outlook—for gaming stocks.
The reaction? Basically blah. Though down in recent days, gaming stocks are mixed since June 30.
If there are trends, it is that regional casino operators are down while digital stocks are up.
Here are the changes since June 30 of domestic regional casino operators as of this writing:
| Penn | -4.7 percent |
| Century Casinos | -5.6 |
| Monarch | -6.0 |
| Boyd | -6.7 |
| Golden Entertainment | -9.2 |
| Red Rock | -10.2 |
| Churchill Downs | -13.1 |
| Full House Resorts | -24.5 |
These stocks mostly reflect the slight declines in regional gaming revenues and the so-so outlooks given by the companies.
In our mind, the two stocks taken behind the woodshed—Churchill Downs and Full House—give opportunities to investors.
Churchill Downs’ steady, step-by-step growth plans remain in place.
Full House suffered from disappointing numbers at its new temporary Illinois casino and doubt about its future given a lawsuit by the Potawatomi Indians over the casino licensing selection process. The suit alleges bias by Waukegan officials towards a failed bidder and not the state gaming board’s selection of Full House, but it has raised speculation that the license could be rebid.
Reaction seems over done. For one, Full House will open its Chamonix casino in Colorado on December 26 and the transformational project for the Cripple Creek market alone should generate earnings that support a doubling or tripling of the stock price.
Meanwhile, in Waukegan, the ramp-up has been slow for a variety of reasons, but gaming revenues have accelerated recently, the property will ramp up and risks to the license would seem remote.
It is worth noting that in the face of the sell-off, two Full House directors reached into their pockets to make open-market stock purchases.
Among pure-play digital players, the headlines are grabbed by DraftKings, which has run up from its lows, but just flat quarter-to-date.
The big gains have come from a variety of small players such as operator Rush Street Interactive, up 29.5 percent, and games provider Bragg Gaming, up a whopping 80.8 percent.
Perhaps most interesting is the rise in the stocks of companies that provide services to digital operators, especially those in affiliate services and publishing:
| Gambling.com | +43.1 percent |
| Gaming Innovation Group | +19.4 |
| Catena | +16.3 |
| Acroud | +5.4 |
| Raketech | +5.3 |
| BetterCollective | +4.3 |
Finally, it is important to mention the more traditional gaming suppliers that provide slot machines, systems and, increasingly, digital games to casinos and online operators.
Their stock performances have been a mixed bag since June 30, but one small company and one larger one are of note: AGS and Light & Wonder.
AGS stock has suffered for several years but the company has beaten expectations for several quarters and investors appear to be noticing.
Then there is L&W. The story has been a long and, fair to say, tortured one since the company came into being as an amalgam of several slot and table game companies.
But L&W has undergone a restructuring under the leadership of Executive Chairman Jamie Odell, who previously laid the groundwork for Aristocrat’s current great success.
The balance sheet has been repaired, lines of business simplified, and leadership has changed with the appointment last year of Matt Wilson as CEO. Consequently, the bottom line has improved.
Investors have noticed. As of this writing, L&W stock is near its new high just shy of $75 a share and is up over 6 percent for the quarter.
