The casino industry is a subset of the larger gaming industry, including leisure and resort properties and casino gaming. Casinos, resorts, hotels, ski resorts, and racetracks are all owned and operated by companies in this industry. Companies engaging in online gaming are also included in this category. Las Vegas Sands Corp. (LVS), Wynn Resorts Ltd. (WYNN), and MGM Resorts International (MGM) are some of the most well-known casino businesses in the industry. Due to the pandemic, many firms with big physical casinos had substantial quarterly revenue and earnings losses in 2020. Following that, in the first half of 2021, there was a modest recovery.
As more people stayed at home at this time, internet gambling grew in popularity. The VanEck Gaming ETF (BJK) serves as a benchmark for the gaming industry’s performance. However, investors should be aware that it contains non-casino gambling equities with unique investment characteristics, such as DraftKings Inc. (DKNG), an online sports betting firm. Over the past 12 months, BJK has slightly outperformed the broader market, delivering investors a total return of 37.5%.
Wells Fargo is particularly positive on gambling and casino equities on a case-by-case basis. Concerns about the Chinese economy, regulatory crackdowns, and the uncertainty surrounding a gambling legislation review in Macao have all been key bearish drivers for casino stocks. Analysts have begun coverage of a dozen casino stocks and advise investors to be cautious. However, it isn’t a bad idea to embrace the “buy the dip” attitude.
Analysts are excited about several casino and gambling stocks with momentum that could provide value to your portfolio. Let’s take a brief look at just a few for now:
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Boyd Gaming Corp. (BYD)
Boyd Gaming Corp. (BYD) engages in the management and operation of gaming and entertainment properties. It operates through various segments and owns many properties. Its portfolio includes hotels, casinos, breweries, resorts, and spas. On its premises, it also has entertainment, dining, retail, and recreational amenities. The company was founded by William Samuel Boyd and Sam Boyd on January 1st, 1975, and is headquartered in Las Vegas, NV. BYD has had a significant margin increase in recent quarters, and most of that growth is sustainable, given its Las Vegas business’s margins of more than 50%. Furthermore, Boyd holds a 5% interest in FanDuel, which analysts project is worth $1.3 billion.
BYD reports earnings again at the end of the month on the 27th, but in the meantime, it shows an EPS (Earnings-per-share) of $1.24 per share and revenue of $840.1 million. The analysts’ forecasts look good in terms of growth, and although it doesn’t currently pay a dividend, that may change as the business continues to build momentum. The consensus price target for BYD from the analysts that provide 12-month predictions is 83.50, with a high estimate of 92.00 and a low of 70.00. The median estimate is up 25.13% from its current price. The consensus among analysts also gives BYD a strong buy rating.
Caesars Entertainment Inc. (CZR)
Caesars Entertainment, Inc. (CZR) is a holding corporation specializing in the entertainment and hospitality industries. They oversee worldwide properties, and other companies like Caesars Interactive Entertainment; Harrahs, Horseshoe, Wsop, Linq, Caesars, and Paris are among its brands. William Fisk Harrah started the firm in 1937, and it is based in Reno, Nevada. CZR owns and operates 44 casinos and entertainment venues in 13 states in the United States. About 25 of the company’s 44 properties are leased.
CZR‘s online betting company is valued at over $42 per share and is expected to grow in market share over time. In the short run, CZR is also an outstanding potential Vegas rebound option. CZR is on target to generate free cash flow to around $10 per share by 2023, according to projections, which will help the firm pay down debt. They report earnings again on November 3rd but show an EPS of $0.13 per share and revenue of $2.7 billion for the current quarter. The median price target for CZR from analysts that provide 12-month price projections is 127.00, with a high of 148.00 and a low of 112.00. The median forecast implies an increase of 8.46% from the most recent price. It’s also agreed among analysts that we should buy shares of CZR.
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DraftKings Inc. (DKNG)
DraftKings (DKNG) is a daily fantasy sports tournament and sports betting site based in the United States. Users may participate in daily and weekly fantasy sports tournaments and earn money based on individual player achievements in major American sports (MLB, NBA, NFL, NHL, and PGA), NASCAR car racing, mixed martial arts (MMA), Canadian Football League, and tennis. In the US’s three primary state online sports betting marketplaces, the firm is second only to FanDuel in market share. DKNG was founded by Jason Robins, Paul Liberman, and Matthew Kalish and is based in Boston, MA.
DKNG holds roughly 17% percent of the online betting industry in the United States. Still, it’s projected that share may rise as the firm fine-tunes its offerings and combines the assets it just purchased from Golden Nugget Online Gaming. Its latest earnings report beat Wall St. analyst projections and has solid year-over-year financials. DKNG shows Y/Y revenue growth of 319.57%, net income growth of 41.78%, and a profit margin of 86.12%. For the current quarter, they show $230.6 million in sales. DKNG has a consensus 12-month price target of 73.00, with a high of 105.00 and a low of 41.00 among the analysts that provide 12-month price estimates. The median estimate is up 48.40% from its current price. The analysts also agree strongly with DKNG’s buy rating.
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