Las Vegas Strip Sentiment in the Doldrums, Says Analyst

• Ahead of Q2 earnings reports, Q3 already shaping up to be disappointing
• Analyst says RevPar, July rate checks trending downward

Shares of MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR), the two largest operators on the Las Vegas Strip, have notched impressive rallies of late, soaring an average of about 9% over the past month. Those rebounds may belie weakness in the US casino center, however.

In a report to clients on Monday, Deutsche Bank analyst Steven Pizzella noted investor sentiment regarding Las Vegas Strip operators remains depressed — the result of tepid visitation and disappointing rev per available room (RevPAR) data. Compounding those woes, which were highlighted ahead of an upcoming avalanche of second-quarter earnings reports, is the analyst’s forecast calling for downbeat earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) results for the current quarter.

Sentiment for the Las Vegas strip remains low, driven by: 1) year-to-date non- convention visitation, a proxy for leisure, down 8.3% Y/Y (May -9.0% Y/Y), 2) LV Strip RevPAR down 4.8% Y/Y in May, STR Las Vegas June RevPAR down 19.2% Y/Y, and STR weekly Las Vegas RevPAR down ~20% on average, the first two weeks of July, and 3) forward room rate checks that are uninspiring,” observes Pizzella.

He added average daily rates (ADRs) on the Strip could experience compression in the “mid- to high-single-digit range” over the summer months because leisure spending factors more prominently into the equation during that time.

Las Vegas Strip Casino Stocks Require Patience

Broadly speaking, casino stocks have performed admirably this year, notching impressive rallies off the post-Liberation Day lows. Still, investors in search of big gains with the group may need to exercise patience while waiting for a more sanguine macroeconomic environment to emerge next year and in 2027.

“Looking ahead, we believe the group outlook for 2026 through 2027 remains bullish with gains not only from group occupancy and rate, but also food and beverage/catering commitments,” adds Pizzella. “While a lot can change, we think the longer-term setup bodes well, and we believe the strength relates, to some degree, to share gains from other large group host city competitors, with technology-related business playing a role.”

Specific to Caesars, Wall Street estimates indicate the company could save as much $60 million in yearly interest expenses for every 100 basis points rates decline, but it could take some time for that benefit to come to fruition.

Still, elevated interest rates are likely weighing on Caesars’ ability to sell assets because some prospective buyers may need to finance those acquisitions. Higher rates push buyers’ financing costs higher, potentially keeping suitors at bay.

Digital Gaming a Bright Spot

While the Las Vegas Strip is contending with a challenging economic environment, iGaming and online sports wagering remain bright spots for the industry. From the investment perspective, that theme is better accessed via operators such as DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT).

“In addition, we note we have seen an uptick in interest for the sports betting data providers (SRAD/GENI), especially from longer-term oriented investors, which we believe are attracted to the predictable long-term fixed revenue growth, as 60% to 70% of the businesses are a fixed recurring revenue stream, growing at low to mid-teens compound annual growth rates,” concludes Pizzella.