Casinos & Hotels
Las Vegas Is Open for Business Again: 4 Top Gaming Stocks to Buy Now
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It was eerie to see much of the United States shut down over about the past 90 days. Video of Times Square in New York City, the French Quarter in New Orleans and other usually bustling spots around the country showed that they were empty and desolate. Perhaps no other landmark city though looked as odd empty and deserted than Las Vegas.
The Las Vegas strip was totally empty but for a few pedestrians and cars, and at night the towering monoliths to gambling and entertainment stood empty while splashed with light for all still to see. That all changed late last week as the gambling mecca returned to action with social distancing at slot machines, face masks at the blackjack tables and limited capacity in the casinos, but they opened the doors.
Some of the top gaming stocks have already rallied nicely off the March lows, but they still have some big upside potential. We screened the BofA Securities gaming universe for Buy-rated stocks and found four that look like great ideas for the second half of 2020. Remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Boyd Gaming
This has remained a Wall Street favorite for years. Boyd Gaming Corp. (NYSE: BYD) operates as a multi-jurisdictional gaming company through three segments: Las Vegas Locals, Downtown Las Vegas and Midwest and South. The company was founded in 1973 and is headquartered in Las Vegas, Nevada.
As of March 13, 2019, the company operated 30 gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. It also engages in owning and operating a travel agency.
Boyd remains a favorite for Las Vegas locals and is substantially levered to the Las Vegas market. The company generally targets largely locals in this market. The company’s downtown properties also draw Hawaiian tourists. In general, Las Vegas locals performance is less affected by weekends versus weekdays in a period than other gaming markets would be, as a substantial portion of the local economy works in hospitality.
The analysts noted this when the company reported first-quarter results:
Boyd Gaming reported first quarter 2020 adjusted EBITDA of $144 million versus our/Street estimates of $160 Million and $162 million. Management said it expects monthly cash burn during the shutdown of $60 million per month which is slightly better than our estimates. Boyd is well positioned within Gaming given its 1) strong balance sheet, 2) mostly owned real estate and 3) Regionals exposure.
The BofA Securities price target for the shares is $25, and the Wall Street consensus target is $21.64. Boyd Gaming stock closed Friday at $24.61, up over 5% on the day.
Las Vegas Sands
As casinos start to open back up, this is a great long-term play for growth investors. Las Vegas Sands Corp. (NYSE: LVS) develops, owns and operates integrated resorts in Asia and the United States.
The company owns and operates the Venetian Macao Resort Hotel, the Sands Cotai Central, the Parisian Macao, the Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao in Macao, the People’s Republic of China, as well as Marina Bay Sands in Singapore.
It also owns and operates the Venetian Resort Hotel Casino on the Las Vegas Strip and the Sands Expo and Convention Center in Las Vegas. Its integrated resorts feature accommodations, gaming, entertainment and retail malls, convention and exhibition facilities, celebrity chef restaurants and other amenities.
The company has eliminated the dividend and said that it has ended its plans to open an integrated resort casino in Japan. The analysts noted this when the company reported earnings in April:
Las Vegas Sands reported first quarter adjusted property EBITDA of $437 million, well ahead of our model and the Street but still down 69% year over year. Management gave estimated “zero revenue” cash burn figures that are much better than our previous assumptions. The company’s balance sheet and favorable Asia-centric exposures set them up to be one of the most attractive opportunities in Gaming.
BofA Securities has a $61 price target, while the consensus target is $59.06. Las Vegas Sands stock was last seen trading at $52.97 a share.
24/7 Wall St.Penn National Gaming
This is an analyst favorite for online gaming. Penn National Gaming, Inc. (NASDAQ: PENN) owns and manages gaming and racing properties, and it operates video gaming terminals with a focus on slot machine entertainment. It also offers live sports betting at its properties in Indiana, Iowa, Mississippi, Nevada, Pennsylvania and West Virginia, and it operates an online casino under the name of iCasino in Pennsylvania.
As of March 16, 2020, the company owned, managed or had ownership interests in 41 gaming and racing properties in 19 jurisdictions. It owns various trademarks and service marks, including Ameristar, Argosy, Boomtown, Greektown, Hollywood Casino, Hollywood Gaming, Hollywood Poker, L’Auberge, M Resort and MYCHOICE.
The analysts noted this just last week:
Penn Gaming has seen strong initial results in iGaming in Pennsylvania (+91% YTD, and profitable) but will not really participate in sports betting until the launch of its Barstool Bets branded app. The opportunity for Barstool is converting a portion of its 66 million unique visitors into paying sports betting customers. We estimate if PENN/Barstool is able to trend toward 10-15% market share on a $5 billion 2021 market at a ~6.0x revenue multiple, the sports betting and iGaming opportunity alone could be valued at $20-25/share.
The $41 BofA Securities price target is well above the $26.00 consensus target estimate. Penn Gaming ended last week trading at $36.04 per share.
Wynn Resorts
This top company saw the departure of its namesake founder in 2018 but the stock has rallied back smartly from the March lows. Wynn Resorts Ltd. (NASDAQ: WYNN) operates Wynn Macau and Encore at Wynn Macau resort located in the People’s Republic of China.
The Macau resorts feature approximately 284,000 square feet of casino space, which offers 24-hour gaming and a range of games, with 458 table games and 708 slot machines, private gaming salons, sky casinos and a poker room. Its two luxury hotel towers have a total of 1,008 guest rooms and suites, as well as casual and fine dining in eight restaurants, about 57,000 square feet of retail shopping in stores and boutiques, around 31,000 square feet of space for lounges and meeting facilities, and the Rotunda show. Recreation and leisure facilities include two health clubs, spas, a salon and a pool.
In Las Vegas, the company also owns and operates the Wynn Las Vegas and Encore at Wynn Las Vegas resorts, with a total of 4,748 hotel rooms, suites, and villas; 232 table games; 1,866 slot machines; a race and sportsbook and poker room in approximately 186,000 square feet of casino gaming space, including a sky casino and private gaming salons.
The analysts said this when the company reported last month:
WYNN reported in-line Q1 adjusted property EBITDA after adjusting for accruals for staff wages during the furlough. We reiterate our Buy and raise our price objective on valuation/faster re-ramp in Macau.
BofA Securities raised its price target to $95. The consensus target is $93.94, but Wynn Resorts closed Friday way above both levels at $101.16, up a huge 6.5% on the day.
While these top stocks have rallied off the March lows, you can bet that gamblers and tourists are ready to return to Las Vegas and casinos around the country. With sports betting far more ubiquitous after the Supreme Court ruling in 2018, there’s a good chance that the last half of 2020 will be booming for these stocks.
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