Gambling and casino industry continues to show some signs of strong growth near 2023 end, with customers driving to brick-and-mortar gambling houses and casinos. As a result of this, the industry has seen healthy profits which suffered badly due to COVID-19 pandemic. Let us now have a look at some numbers, which further strengthens the growth prospects of gambling industry.
Per the recent report by Wall Street Journal in October 2023 month, Macau saw a whopping ~655,000 visitors, the place which has been tagged as the gambling hub of the world. This number was during first 5 days of China’s long fall holiday. Yes, you read that right! Surprising, isn’t it?
Fresh influx of data exhibit that gambling activity in Macau was healthy as and when 2024 started. As per data from Gaming Inspection and Coordination Bureau, gross gaming revenue in Macau saw an increase of ~67% year over year to reach at ~$2.4 billion in Jan 2024 alone. This figures surpasses estimates of 63% growth.
Growth Prospects of Gambling Industry
Well, this is not the end of growth prospects of gambling industry. Another catalyst for casino industry is healthy gambling activity in Macau which was seen during Lunar New Year Holiday in China. Gambling hub reported ~1.08 million visitor arrivals during first 6 days of week-long holiday which kicked off on Feb. 10, exhibiting a rise of 3.7% from 2019.
A catalyst for gambling stocks in 2024 was Super Bowl, in which gambling activity appears to have crushed all the previous records as per new estimates. There are reports claiming that betting handle in Super Bowl 2024 saw an increase of 27% year over year in key states such as Nevada, New Jersey and New York.
With this in mind, we will now unveil some of the gambling and casino stocks which are expected to benefit from the upbeat growth prospects of gambling industry.
1. Bally’s Corporation
Ballys Corp carries out its operations in casino industry. It owns gaming and racing facilities, which includes slot machines and various casinos.
In 3Q23, the company saw record company-wide revenue of $632.5 million, exhibiting a rise of 9.4% year-over-year and record Casinos & Resorts revenue of $359.0 million, increase of 9.3% year-over-year.
The company generated strong operating results throughout all 3 of business segments as revenues increased, while achieving significant development and project milestones. Core Casinos & Resorts segment exhibited 3Q revenues of $359.0 million, a rise of 9.3% in comparison to 3Q22.
It saw consolidated net loss in 3Q23 of $61.8 million and generated adjusted EBITDAR of $173.2 million and adjusted EBITDA of $141.6 million. The company’s portfolio of assets is well-positioned, and it has seen strong year-over-year revenue growth. It continues to take share in respective markets, and this has been demonstrated by monthly gaming data, as it outperformed peers in most of the states.
The company has adjusted revenue guidance for the remainder of the year to $2.4 billion – $2.5 billion. Guidance range for adjusted EBITDAR is $640 Mn – $655 Mn. It has maintained its 2023 capital expenditure guidance of $160 Mn in aggregate as the company completes its capex expansion cycle.
2. Red Rock Resorts, Inc.
The company, together with its subsidiary, is gaming, development, and management company. It mainly establishes strategically-located casino and entertainment properties.
It has released financial results for 4Q and full-year ended December 31, 2023, net revenues coming at $462.7 million for 4Q23, up by 8.8%, or $37.2 million, from $425.5 million during same period of 2022. Net income of the company was $108.9 million for 4Q23, exhibiting a decline of 36.0%, or $61.3 million, from $170.2 million during same period of 2022.
Its net revenues came in at $1.72 billion in FY23, showcasing a rise of 3.6%, or $60.3 million, from $1.66 billion in 2022. The company’s cash and cash equivalents as at December 31, 2023 came at $137.6 million and total principal amount of debt outstanding at end of 4Q was $3.4 billion.
JMP Securities raised its price objective on Red Rock Resorts from $55.00 to $61.00, giving the stock a “market outperform” rating in a report dated February 8th. Another company, Truist Financial, covered this stock in which it has increased its target price on from $46.00 to $55.00. This firm has given a “Hold” rating in report dated December 20th.
Swiss National Bank upped its stake in the company by 1.0% in 3Q, as per the company’s recent 13F filing with SEC. The fund owned ~108,700 shares post the acquisition of additional ~1,100 shares. Nelson Van Denburg & Campbell Wealth Management Group LLC purchased new position in Red Rock Resorts during 1Q, worth ~$30,000. Another investment firm, Lazard Asset Management LLC bought new position during 4th quarter, which was valued at ~$34,000.
3. Monarch Casino & Resort, Inc.
The company is engaged in offering the latest gaming, dining, and hospitality amenities. It has reported operating results for 4Q ended December 31, 2023, with net revenue coming at $128.2 million and adjusted EBITDA at $43.0 million, exhibiting 6.3% and 3.4% year-over-year growth, respectively.
Monarch Black Hawk’s operation continued to ramp up as it converted ongoing revenue growth to margin expansion and double-digit property-level EBITDA growth. With strong and healthy balance sheet and no debt, the company is positioned to continue to invest in its properties and pay cash dividends, and to take into consideration share repurchases in its existing share repurchase authorization.
As at December 31, 2023, it had cash and cash equivalents of $43.4 million and outstanding principal balance of $5.5 million in its credit facility. During 4Q23, it made $2.5 million in principal payments related to its credit facility.
Conclusion
While above are some of the stocks which are likely to benefit from the healthy growth prospects of gambling industry, there are experts and analysts who are betting on this industry.
Infact, some experts believe that this is the time to invest in gambling and casino stocks since stronger equity markets tend to bode well for overall casino and gaming industry. For 2024, there are several growth enablers such as resilient economy, sectoral growth rate of ~10% per year.
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