Corporate earnings commence on Wednesday, posing queries regarding Macau, regional markets, and Las Vegas.
In the upcoming second-quarter earnings season, the gaming and casino industry is gearing up for some interesting developments, according to Bank of America analyst Shaun Kelley.
Kelley expects a strong performance for regional casinos in Las Vegas, with local play strength and margin improvements. Companies like Boyd Gaming, which reported its first year-over-year revenue and EBITDA growth in over two years in its Las Vegas Local segment, are set to benefit from this trend. Boyd Gaming has a price target of $95 from Bank of America.
The outlook for Macau casinos, represented by companies like Las Vegas Sands, is more volatile but still showing signs of strength. Despite challenges, Kelley projects potential sustained revenues around $600-650 million for Macau casinos, with a stretch goal of $2.5 billion core revenues in some comments. Bank of America has set a price target of $52.50 for Las Vegas Sands.
Online sports betting companies, such as DraftKings and FanDuel, are indicating strong growth metrics. DraftKings is expected to report second-quarter EBITDA of $250 million to $300 million, with investors leaning toward the higher end. DraftKings has a price target of $50 from Bank of America. However, Kelley projects EBITDA downgrades of $60-$80 million for related companies due to unfavorable NFL betting outcomes.
In the Macau market, Kelley is raising his second-half outlook, now modelling gaming revenue up 5% year over year to reflect a continuation of recent trends. Meanwhile, Kelley's room rate survey shows a weakness, down -11% on a forward rolling-three-month basis.
Shaun Kelley expects Caesars, which is outperforming, to be up 5% year over year in June so far. Bank of America has set a price target of $40 for Caesars Entertainment. MGM Resorts International, which closed at $37.72 on Tuesday and has only gained $4 so far this year, is also under Kelley's watchful eye. Bank of America has set a price target of $40 for MGM Resorts International.
Penn Entertainment has a price target of $20 from Bank of America, while Wynn Resorts stock has risen by $22 over the last month and closed Tuesday at $111. Bank of America has set a price target of $125 for Wynn Resorts.
The second-quarter earnings season starts on Wednesday and will continue in earnest next week. Online sports betting hold in June was solid for the second month in a row, according to Kelley. The industry is eagerly awaiting the financial reports to see how these projections play out in reality.
The upcoming second-quarter earnings season is a significant event for various sectors, including the lifestyle segment like online sports betting, as companies such as DraftKings and FanDuel indicate strong growth metrics. Meanwhile, in the finance sector, Technology-driven companies like DraftKings are projected to report robust second-quarter EBITDA.
In the casino-and-gambling industry, finance analyst Shaun Kelley projects potential sustained revenues around $600-650 million for Macau casinos, while regional casinos in Las Vegas, such as Boyd Gaming, are expected to benefit from improved local play strength and margins. The sports industry also holds attention, with Caesars Entertainment outperforming and projected to be up 5% year over year in June.
