Boyd Gaming (NYSE:BYD) and MGM Resorts International (NYSE:MGM) are new additions to JPMorgan’s monthly list of top equity ideas.
The pair of Las Vegas-based casino operators are among 10 stocks the Wall Street bank is bullish on for the seventh month of the year, and are two of three new members of the list, with the other being custodian bank State Street (NYSE:STT).
Las Vegas-based Boyd runs 28 gaming venues across 10 states, including 11 in its home city. Although the stock is coming off a sluggish June showing, it’s up nearly 45 percent year-to-date, with analysts mostly bullish on the name due to industry-leading margin expansion, strength in regional markets, pent-up demand from the 55+ demographic, and underappreciated sports betting exposure.
JPMorgan analyst Joseph Greff echoes a similar sentiment, noting the Orleans operator should benefit from “a healthy consumer backdrop” and “a return of the core 55+ demographic.”
The analyst adds that the Boyd margin story that was built, due in large part, to the coronavirus pandemic can remain in place as COVID-19 fades. They also said that the operator will capitalize on its prime positioning in the Las Vegas locals market.
Greff is positive on MGM Resorts, too, with the surprising strength of the Las Vegas recovery acting as a primary catalyst for shares of the largest Strip operator.
Every week continues to build in terms of revenues and margin improvement, and [domestic casinos] are a segment that can drive positive estimate revisions,” Greff said.
On Thursday, the Bellagio operator made waves in its industry, announcing that it’s doling out $2.12 billion to buy the 50 percent of CityCenter it doesn’t already own. It is also selling the real estate assets of Aria and Vdara to private equity firm Blackstone (NYSE:BX) for $3.89 billion.
Some analysts expect MGM will use proceeds from that transaction to continue building its thriving BetMGM iGaming and sports wagering business. On that note, Greff sees BetMGM taking market share from rivals, and that neither company is getting the credit it deserves for online growth.
In making room for Boyd, MGM, and State Street, JPMorgan removed five stocks from its monthly top ideas list, including a pair of gaming names — MGM Growth Properties (NYSE:MGP) and Wynn Resorts (NASDAQ:WYNN).
The bank did not elaborate on the reasons why those names were pulled from the list. Wall Street is mostly bullish on MGP, though the shares traded lower yesterday on news of the aforementioned MGM transactions. MGP is the casino company’s primary landlord, but it’s not included in the Aria/Vdara sale.
As for Wynn, that stock is lower by 9.10 percent over the past month due in large part to still-lingering travel restrictions on Macau, which are hindering recovery in the world’s largest gaming hub.