Las Vegas Casino Stocks Poised for Comeback Despite Recent Struggles
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Despite the harsh downturns seen since early August, a handful of Las Vegas casino equities are locked in bearish trading cycles. Whilst many may interpret this as a cause for concern, there exist analysts who affirm that this dip in performance may merely be a temporary setback, and that the future for Strip operators appears promising in the medium term.
An astute observation was offered by Chad Beynon, an analyst at Macquarie, in a recent client advisory. According to his interpretation, despite apparent short-term disruptions, the gross gaming revenue (GGR) in Las Vegas for the month of August exhibited resilience. This has led him to infer that the GGR for 2023 may turn out to be approximately 5% higher than that of the previous year. He further highlighted that slot machine operations remain steady and that non-gaming revenue sources, including Revenue per Available Room (RevPAR), continue to remain robust.
In respect to non-gaming entities, data spanning August and up to September 23rd indicates that Strip RevPAR growth for the third quarter could outpace consensus predictions, falling within the low-to-mid-single digit range. Supporting this is the record-setting passenger volume for Las Vegas’ airport terminal back in July, achieving a 1.7% year-over-year increase and boasting the highest international passenger volume since January 2020. Even with August’s subtle decline, overall TSA data trends hint at a sustained surge in numbers.
Such data indicators might herald renewed growth for companies like MGM Resorts International and Caesars Entertainment, two of the largest Strip operators. Cumulatively, they command almost 60% of the GGR in the area.
Turning to the disruptions adumbrated by Beynon, it could refer to the ransomware attacks that recently plagued both Caesars and MGM. Carried out by the same group using eerily similar methods, the companies’ responses varied wildly. While Caesars chose to settle the ransom demand through their cyber insurance coverage, MGM handled the situation independently, ensuing in a turbulent ten days for their casino hotels nationwide.
However, the silver lining for investors may lie in the sharp declines the stocks of Caesars and MGM faced following the cyber attacks. As Beynon points out, even though the attacks may exert a short-term negative influence, it seems share prices have overreacted to the grim news, providing potential opportunities for savvy investors.
Gearing up for what appears to be a potential bounce back, prospects for future growth seem promising. Las Vegas casino stocks have potential catalysts ripening on the horizon, including a rich tapestry of events lining up over the next few years. These include NCAA men’s Division I basketball tournament games, Formula 1, LV Raiders and Golden Knights games, and the 2024 Super Bowl among others.
However, potential labor strikes authorized by members of the Culinary and Bartenders Union present a possible roadblock for this positive outlook.
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