Gaming operator and slot manufacturer stocks stand to benefit from the Tax Cuts and Jobs Act, the tax reform plan passed by Congress in December and then signed into law by President Donald Trump.
Investment bank Citi opines that it’s not only US-based gambling companies that stand to reap the financial rewards of Americans having more money in their pockets. In a note issued this week, Citi predicted that Australia’s Aristocrat Leisure, the second-largest slot machine manufacturer in the world, will see revenues increase due to the new tax law as well.
“We believe that reductions to personal tax rates in the US across various income brackets could bode well for Aristocrat Leisure’s North America segment,” noted Citi analyst Rohan Sundram, who oversees gaming research for the investment firm.
Aristocrat, which has offices all over the world and its American headquarters in Las Vegas, has been paying a 36 percent tax on its US operations. That number, per Morgan Stanley, will drop under the Tax Cuts and Jobs Act and subsequently deliver a global nine percent bonus to the manufacturer’s bottom line: 70 percent of the company’s revenue is generated in the United States.
Aristocrat confirmed to The Sydney Morning Herald this week that “any reduction in US corporate tax rates will be beneficial.”
Redistributing the Wealth
Citi’s Rohan Sundram believes the US tax reform will lead to more Americans distributing some of their discretionary income on trips to gaming hubs. Steve Wynn predicts a similar outcome.
The billionaire said of the Republican Congress and President Trump’s tax cuts, “A major recipient of this sort of mentality in the government is Las Vegas. We were victimized by the wet blanket, over-regulatory oppressiveness of the Obama administration. All of us out here suffered. Well, everything is changed, and we’re going to ride this at full speed.”
This week, Wynn Resorts joined hundreds of other US businesses in announcing plans to share the corporate tax savings with its 12,000 domestic employees.
Aristocrat Leisure’s two main US competitors, International Game Technology (IGT) and Scientific Games, will also benefit from the tax plan, Morgan Stanley stated.
The nonpartisan Tax Policy Center in Washington, DC recently concluded that the average American household will save about $1,600 on their annual taxes in 2018.
The hopeful change has fueled a Wall Street rally, with the Dow Jones Industrial Average soaring from 24,726 the day Congress passed the measure to 26,300 as of Wednesday morning. That’s an increase of more than six percent.
And that bodes well for Las Vegas. When the US recession hit in 2008, gaming revenue plummeted nearly 13 percent on the Strip, as Americans saw their savings vanish and spending money dissipate.
Then-President Obama’s famous advice to citizens during a speech in New Hampshire in 2010, at the height of the recession, to ” [not] blow a bunch of cash on Vegas when you’re trying to save for college” was a bitter pill for the tourism-dependent economy of Sin City, and it was never forgotten by the gaming industry there.
But eight years late, it’s all turned around. Paired with industry analysts bullish on Macau, it’s no surprise that investment experts believe numerous publicly traded gaming stocks are smart buys.
According to research firm Morningstar, Nevada casino operators Las Vegas Sands, MGM Resorts, Wynn Resorts, Caesars Entertainment, and Boyd Gaming are all rated at “buy.”