Las Vegas Casino Consumer Still in Strong Shape, Says Analyst

Posted on: March 11, 2024, 04:27h. 

Last updated on: March 12, 2024, 11:21h.

Visitors keep finding their way to Las Vegas, and that could be beneficial to casino operators’ first-quarter results.

Nevada casinos Las Vegas gaming revenue GGR
The Welcome to Las Vegas sign. Consumer trends there remain vibrant, but there’s lethargy at some regional casinos. (Image: Shutterstock)

Likewise, Macau concessionaires and online gaming firms are positioned to reap the benefits of resilient consumer spending trends. Citing stability among consumers, Macquarie analyst Chad Beynon sees Macau operators, online betting firms, and Las Vegas Strip casino giants as the preferred ways to play, with gaming suppliers and regional casino companies lagging behind that trio.

Benyon noted that Caesars Entertainment (NASDAQ: CZR), MGM Resorts International (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN) are poised for mid- to high-single-digit increases for first-quarter revenue per available room (RevPAR). Those estimates are helped by last month’s Super Bowl.

Our analysis incorporates data for February, which came in at +63% YoY in Vegas (Super Bowl benefit),” wrote Beynon. “By comparison, this compares to the F1 benefit in November, driving RevPAR growth of +24%. We think MGM/CZR are better positioned to capture this benefit vs 4Q, when disruptions and a skew to higher-end F1 customers affected results.”

He has “outperform” ratings on MGM and Caesars, the two largest Strip operators, and on Wynn.

Decent Outlook for Macau

March is typically a decent month relative to December in Macau, with gross gaming revenue (GGR) in the Chinese casino enclave typically exceeding the December tally by 6%. Beynon sees 5% growth this month, which could be a precursor to decent first-quarter results for concessionaires.

Las Vegas Sands (NYSE: LVS) is the largest Macau operator with five casino hotels, while Wynn Macau and MGM China run two integrated resorts apiece. Recent data indicate all three operators gained market share in 2023.

“Consensus now calls for 1Q24E Macau EBITDA quarter-over-quarter to be as follows: LVS +9%, WYNN +2%, and MGM -4%,” added Beynon. “We expect 2024E GGR of -19% vs 2019 (+29% year-over-year), or ~US$29.5bn, with mass continuing to run above pre-pandemic levels.”

Benyon’s price targets on Sands and Wynn, the U.S.-based companies most levered to Macau, imply upside of 20% and 27%, respectively.

Less Bullish on Regional Casino Names

While the U.S. consumer appears strong in the face of high interest rates and persistently elevated inflation, that strength isn’t linear across all casino markets, as highlighted by some modest signs of softness in select regional markets.

Of the eight “neutral” ratings Beynon assigns to gaming stocks in his coverage universe, five are on regional casino operators. That quintet includes Bally’s (NYSE: BALY), Boyd Gaming (NYSE: BYD), and Monarch Casino & Resort (NASDAQ: MCRI).

“January was difficult, given abnormally disruptive weather in as many as three of four weekends in some regions. All told, January results (the least important month of the year) experienced a -6% GGR. At this time, we stick with our 1Q US Regional estimate of -1% (-1 to -2% SS), while current cons calls for a 4% YoY EBITDA decline,” concluded the analyst.