Despite the bullish reports in the general business press about the strength of Las Vegas and other travel-related industries, it appears that not all is well in the world of blackjack and spinning reels.
At least not in regional casinos. Here’s the year-over-year casino gaming revenues for August, reported in just the past few days:
Detroit – 2.9 percent
Missouri – 2.9
New Jersey – 3.6
Illinois – 3.9 (same store)
Indiana – 5.7
Notice a trend?
Nor is gaming isolated. More retailers are reporting declining sales and/or customers trading down. The number of Americans in poverty has grown from last year. Opinion surveys show Americans increasingly pessimistic about the economy. And despite higher interest rates, inflation hasn’t gone away. Indeed, the revenue declines noted above are actually higher given that, all things being equal, inflation is adding several percent to consumer spending.
Obviously, this is not a bullish environment for brick-and-mortar casino operators. And investors have responded accordingly. While major stock market indices are just several percent off of their highs, casino stocks have been hit significantly. The big four casino operators (Caesars, MGM, Wynn and Las Vegas Sands) are down an average of more than 19 percent from their 52-week highs. The best among them, Caesars, is off 13 percent.
Regional operators have been hit even harder, off an average of 29 percent. The best among them, Boyd, is down 13 percent. The question is whether investors have priced in a coming recession or whether there is more pain to come.
In some ways, the environment today is reminiscent of the stagflation of the 1970s, which suffered a grinding bear market.
On the other hand, there is always opportunity and economic hard times provide impetus to innovation that breeds new winners and leads to eventual recovery overall.
In gaming, that innovation is in the rise of digital, whether online casino or sports betting, and in technology, from spiffier new slot machines to cashless gaming to less costly and more productive marketing.
In that regard, it is interesting to look at the winning stocks— and there have been many.
Start with the big three games and technology suppliers. Light & Wonder, IGT and Aristocrat have been at or near their all-time highs. Online game companies DraftKings, Rush Street Interactive and Bragg Gaming have been near recent highs, though, admittedly, after precipitous declines.
Digital marketing companies Better Collective, Gambling.com and Raketech have enjoyed recent record highs and offer promise of more ahead.
So, money has been made in gaming stocks, though more among B2B service and technology providers.
Meanwhile, the best of the entertainment providers (the casino operators) will do well over time because having fun will never go out of style.
WHAT WOULD WALT THINK?
Now that Charter Communications has reached an agreement with Disney on pay and reach of streaming content, a cloud has been removed on the ability of 15 million Charter subscribers to watch ESPN and, thus, a cloud has been removed from PENN Entertainment being able to go full-bore on its ESPN Bet deal with Disney.
Perhaps the most interesting and significant aspect of ESPN Bet is one that has received almost no mention—anti-gaming crusader Disney is now in the gaming business.
This about-face mirrors that of the NFL, which has also transformed from being adamantly anti-gaming to becoming a gaming partner, even to the extent that sportsbooks are popping up in NFL stadiums.
The lack of reaction to this deal is interesting because it shows how quickly sports betting, and commercial gaming, generally, have become mainstream.
And it is important because if Disney, of all companies, has joined the betting industry, it is likely that mainstream corporate America and its uber-deep pockets will not be far behind.
