LaraBelova
The casino sector underperformed in Monday afternoon trading as investors continue to turn more cautious that the fundamentals are lining up for disappointing results from Nevada casinos and regionals across the U.S.
Stifel warned that a combination of post-COVID structural shifts and higher interest rates are factoring in to the casino sector, and macroeconomic headwinds cannot be ignored. “Credit card spending analysis suggests deceleration in discretionary categories, though note slightly ‘less bad’ trends than in prior months,” warned the firm. The view is that while a soft landing remains a constant topic from investors and managements, there is very little evidence the sector can stay in a comfortable neutral gear due to savings ratio depletion and a softening jobs environment.
Decliners on Monday included Caesars Entertainment (CZR) -3.05%, Riush Street Interactive (RSI) -3.02%, PENN Entertainment (PENN) -2.36%, Century Casino (CNTY) -2.22%, Boyd Gaming (BYD) -2.05%, and MGM Resorts (NYSE:MGM) -1.69%.
Looking ahead, Macquarie thinks gaming could remain resilient, with younger guests supporting the sector for the next several years. In terms of valuation, analyst Chad Beynon noted that casino operators are trading at ~7.5X estimated 2024 EBITDA, while suppliers are trading at ~7X estimated 2024 EBITDA, both below their long-term averages.