Jefferies Says Jump On the Weakness in Three Top Gaming Stocks and Buy Now

By Lee Jackson Updated Jun 25, 2:18PM EDT · Published Jun 25, 6:06AM EDT

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Jefferies Says Jump On the Weakness in Three Top Gaming Stocks and Buy Now — © Sckrepka / iStock

With the explosion of gambling legalization across the country over the last few years, it was no surprise that investors bid up the stocks. With the typical summer slowdown somewhat underway many of the top companies in the industry were hit and have traded down to levels where savvy investors can buy shares — before the NFL season starts and the numbers take off again.

In a new research report from Jefferies, the analysts make the case that staying with the premier companies in the industry makes sense as many are positioned for the continued expansion of gambling legalization at the state level. They noted this in the report when discussing the industry.

In Gaming, Winners Should Keep Winning. Recent concerns and pressures on shares over the sustainability of margins, the pace and productivity of digital gaming rollout appear to be unfounded, as management teams indicated the recovery in demand continues in regional markets and Las Vegas, while cost maintenance remains on track.

The analysts are very bullish on three top stocks.

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Bally’s Corporation

This well known company has increased its corporate footprint and is offering investors a very intriguing entry point. Bally’s Corporation (NASDAQ: BALY) owns and operates gaming and racing facilities in the United States. Its gaming and racing facilities include slot machines and various casino table games and restaurant and hotel facilities.

The company owns and manages Twin River Casino Hotel in Lincoln, Rhode Island; Tiverton Casino Hotel in Tiverton, Rhode Island; Hard Rock Hotel & Casino in Biloxi, Mississippi; Casino Vicksburg in Vicksburg, Mississippi; Dover Downs Hotel & Casino in Dover, Delaware; Casino KC in Kansas City, Missouri; Golden Gates, Golden Gulch, and Mardi Gras casinos in Black Hawk, Colorado; Bally’s Atlantic City, Atlantic City, New Jersey; Eldorado Resort Casino Shreveport, Shreveport, Los Angeles; and Arapahoe Park racetrack and 13 off-track betting licenses in Aurora, Colorado.

As of April 13, 2021, it owned and operated 12 casinos that comprise 13,308 slot machines, 460 game tables, and 3,342 hotel rooms, as well as a horse racetrack, across eight states.

The Jefferies price target is set at $66, which is much lower than the $76.83 consensus target across Wall Street. The last trade to hit the tape Thursday was $54.75.

Caesars Entertainment

This is a well known old-school gaming company that is offering solid upside. Caesars Entertainment Corporation (NASDAQ: CZR) provides casino-entertainment and hospitality services. The company’s segments include Caesars Entertainment Resort Properties, LLC, Caesars Growth Partners, LLC, and other. The company’s resorts operate primarily under the Harrah’s, Caesars, Horseshoe, and Eldorado brand names.

The company’s facilities include gaming offerings, food and beverage outlets, hotel and convention space, and non-gaming entertainment options. Caesars Entertainment is one of the largest gaming companies in the world and currently owns or operates over 50 casino properties in 13 U.S. states and four countries outside the U.S. It is largest casino company in the U.S.

Caesars Entertainment in January bought a minority stake in fantasy sports platform, SuperDraft. Caesars has the option to increase its stake to 100% over time at predetermined levels. SuperDraft will join Caesars’ online brands, which include World Series of Poker, Caesars Online Casino, and William Hill, and will become part of Caesars’ single wallet solution that allows members more options to play games both live and online.

Jefferies has a $128 price target for the company, while the Wall Street consensus target is set at $125.25. The stock closed Thursday trading at $104.73.

VICI Properties

This is the top pick across Wall Street in the net lease group and is an ideal pick for more conservative investors looking for gaming exposure. VICI Properties Inc. NYSE: VICI) is a triple net lease real estate investment trust (REIT) that was spun out of Caesars Entertainment post-bankruptcy.

The company has 23 mixed-use gaming, lodging, and entertainment properties in its portfolio, as well as a subsidiary that owns four championship golf courses. VICI also owns roughly 34 acres of undeveloped land in Las Vegas, which it leases to Caesars.

Much of the focus recently was on VICI’s recent deal to acquire the real estate of the Venetian Resort in Las Vegas with Apollo as a new tenant. Looking ahead, many on Wall Street are very positive on VICI’s embedded growth pipeline with Caesars Entertainment, including a put/call on the Centaur properties in Indiana (starting in January 2022) and a right of first refusal on a Strip asset sale for Caesars, which could occur soon after a full earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs recovery.

Investors are paid a strong 4.24% dividend. The Jefferies price target is set at $37, while the consensus across Wall Street is set lower at $34.89. Shares closed trading Thursday at $31.11.

These three top companies have all backed up off their respective 52-weeks highs and offer growth investors outstanding entry points and a great way to add gaming exposure to portfolios. While not suited for all investors, those with a touch more risk appetite could be well rewarded the rest of 2021 and beyond.

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About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.