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3 Industry-Beating Casino Stocks to Watch Amid Market Volatility
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The casino industry has seen a turnaround in 2023, despite an economic slowdown. Factors such as a well-spread portfolio across different regions, sustained customer engagement efforts and property investments have contributed to the resilience.
The industry has been benefiting from increased visitation and spending per visit, especially from younger demographics. Also, an uptick in hotel reservations and a burgeoning interest in non-gaming features hint at a potential resurgence in growth.
Casino operators are maintaining a disciplined operational approach by refining business processes, optimizing marketing strategies and renegotiating agreements with vendors and third parties. Also, there's a heightened focus on service quality and staffing levels to accommodate gamers better.
Strong Q3 Performance Uplift Spirits
Despite concerns about economic slowdowns and inflation, gross gaming revenues (GGR) remain strong, especially in regional casinos. Factors like growth of online betting and relaxed gambling laws have contributed to the industry's stability.
In third-quarter 2023, the U.S. commercial gaming sector achieved strong revenues and generated $16.17 billion, indicating a 6.1% increase compared to the previous year. This marks the industry's most lucrative third quarter to date, with continuous annual revenue growth for the 11th consecutive quarter.
Revenue growth across land-based casinos, iGaming and sports betting - contributed to the overall gain. Traditional slot machines, table games, and iGaming collectively produced $12.49 billion in revenue, a 1.8% rise year on year. Meanwhile, iGaming, increased by 26% year on year to $1.52 billion.
Sports betting, both in-person and online, soared by 22.8% year-over-year, amounting to $2.15 billion in revenue. Notably, growth was primarily driven by newer operational states like Maryland (online), Massachusetts, Nebraska and Ohio. With Americans wagering $79 billion in the first nine months of 2023 — up 32.7% year over year — the industry is poised for growth.
AGA president and CEO Bill Miller highlighted the industry's role in creating job opportunities and contributing significantly to communities through increased tax revenue. The third quarter saw a surge in direct gaming taxes, contributing an estimated $3.43 billion to state and local governments in gaming states, a 4.7% increase from the previous year’s levels.
The Macau gaming industry is also reaping the rewards of increased visitation. In November, there was a 435% year-over-year surge in GGR, reaching MOP$16.04 billion (US$2 billion). For the first 11 months of 2023, GGR is up 324.9% year over year. The government of Macau forecasts yielding collective GGR of MOP216 billion ($26.84 billion) in 2024.
Road Ahead
Considering the favorable reception of online platforms and widespread regulatory acceptance across states, we anticipate continued strong performance in the online gaming industry in the coming periods.
Surveys indicate that more than a third of adults still intend to visit a casino within the next year, resembling patterns observed in previous quarters. In particular industries, gaming supplier CEOs anticipate increased unit sales by the year's end, while numerous operator CEOs aim to bolster their investments in food and beverage services.
The outlook for growth remains optimistic as businesses prepare to leverage the introduction of additional live online casino games. Moreover, the inclusion of a robust program schedule featuring events like F1 and the Super Bowl is expected to contribute positively to these developments further.
Investing in the gaming sector might sound profitable right now. It is worth noting that the Zacks Gaming industry is currently in the top 30% (with the rank of 76) of the 251 Zacks industries, which hints at further growth.
Red Rock Resorts, Inc. (RRR - Free Report) stands to gain from strong spending per visit across its portfolio. Attributes such as strong and consistent visitation from guests, increased spending per visit, more time spent on gaming devices and a return of core customers have been adding to the positives. Also, it reported growth in food and beverage and hotel segments fueled by higher average checks and strength in the catering business. It intends to focus on business optimization and cost-reduction measures to drive growth. It also stated its intention to continue its investments in additional amenities, which include the opening of new high-limit slot and table rooms at its Green Valley Ranch properties in late 2023.
Red Rock currently carries a Zacks Rank #3 and has gained 5.4% in the past three months compared with the industry’s 2.3% growth. For 2024, the Zacks Consensus Estimate for RRR’s financial-year sales and earnings per share (EPS) suggests an increase of 10.5% and 17.9%, respectively, from the year-ago period’s levels.
Image Source: Zacks Investment Research
PlayAGS, Inc. (AGS - Free Report) is likely to benefit from robust Domestic EGM gaming operations, an expanding premium unit footprint, and strong performance in the Interactive segment. Their focus on premium games such as Bonus Spin Xtreme and PAX S indicates promising prospects. The company aims to venture into untapped markets and create new products for its table business. It maintains a positive outlook on EGM product demand, strategic business development efforts, and ongoing R&D progress. Expectations for the fourth quarter of 2023 involve solid pricing for Spectra 43, with anticipation surrounding the initial sale of Spectra 49 units and the inclusion of non-Spectra family units in the sales pipeline.
PlayAGS currently carries a Zacks Rank #3 and has gained 12% in the past three months. For 2024, the Zacks Consensus Estimate for AGS’ financial-year sales and EPS suggests an increase of 3.1% and 386.7%, respectively, from the year-ago period’s levels.
PENN Entertainment, Inc. (PENN - Free Report) is likely to benefit from omnichannel strength, technological investments and improvement in marketing capabilities. Management emphasizes reimaging its properties with best-in-class retail sports books, new games, refreshed hotel offerings and new third-party restaurant concepts to drive growth. Also, focus on strategic alliances bodes well. The company is optimistic with respect to integrations across ESPN's wide user base and strong media partnerships. In the future, it expects amalgamation to pave the path for new customer acquisition and organic cross-selling opportunities.
PENN Entertainment currently carries a Zacks Rank #3 and has gained 9.6% in the past three months. For 2024, the Zacks Consensus Estimate for PENN’s financial-year sales and EPS suggests an increase of 0.6% and 114.1%, respectively, from the year-ago period’s levels.
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3 Industry-Beating Casino Stocks to Watch Amid Market Volatility
The casino industry has seen a turnaround in 2023, despite an economic slowdown. Factors such as a well-spread portfolio across different regions, sustained customer engagement efforts and property investments have contributed to the resilience.
The industry has been benefiting from increased visitation and spending per visit, especially from younger demographics. Also, an uptick in hotel reservations and a burgeoning interest in non-gaming features hint at a potential resurgence in growth.
Casino operators are maintaining a disciplined operational approach by refining business processes, optimizing marketing strategies and renegotiating agreements with vendors and third parties. Also, there's a heightened focus on service quality and staffing levels to accommodate gamers better.
Strong Q3 Performance Uplift Spirits
Despite concerns about economic slowdowns and inflation, gross gaming revenues (GGR) remain strong, especially in regional casinos. Factors like growth of online betting and relaxed gambling laws have contributed to the industry's stability.
In third-quarter 2023, the U.S. commercial gaming sector achieved strong revenues and generated $16.17 billion, indicating a 6.1% increase compared to the previous year. This marks the industry's most lucrative third quarter to date, with continuous annual revenue growth for the 11th consecutive quarter.
Revenue growth across land-based casinos, iGaming and sports betting - contributed to the overall gain. Traditional slot machines, table games, and iGaming collectively produced $12.49 billion in revenue, a 1.8% rise year on year. Meanwhile, iGaming, increased by 26% year on year to $1.52 billion.
Sports betting, both in-person and online, soared by 22.8% year-over-year, amounting to $2.15 billion in revenue. Notably, growth was primarily driven by newer operational states like Maryland (online), Massachusetts, Nebraska and Ohio. With Americans wagering $79 billion in the first nine months of 2023 — up 32.7% year over year — the industry is poised for growth.
AGA president and CEO Bill Miller highlighted the industry's role in creating job opportunities and contributing significantly to communities through increased tax revenue. The third quarter saw a surge in direct gaming taxes, contributing an estimated $3.43 billion to state and local governments in gaming states, a 4.7% increase from the previous year’s levels.
The Macau gaming industry is also reaping the rewards of increased visitation. In November, there was a 435% year-over-year surge in GGR, reaching MOP$16.04 billion (US$2 billion). For the first 11 months of 2023, GGR is up 324.9% year over year. The government of Macau forecasts yielding collective GGR of MOP216 billion ($26.84 billion) in 2024.
Road Ahead
Considering the favorable reception of online platforms and widespread regulatory acceptance across states, we anticipate continued strong performance in the online gaming industry in the coming periods.
Surveys indicate that more than a third of adults still intend to visit a casino within the next year, resembling patterns observed in previous quarters. In particular industries, gaming supplier CEOs anticipate increased unit sales by the year's end, while numerous operator CEOs aim to bolster their investments in food and beverage services.
The outlook for growth remains optimistic as businesses prepare to leverage the introduction of additional live online casino games. Moreover, the inclusion of a robust program schedule featuring events like F1 and the Super Bowl is expected to contribute positively to these developments further.
Investing in the gaming sector might sound profitable right now. It is worth noting that the Zacks Gaming industry is currently in the top 30% (with the rank of 76) of the 251 Zacks industries, which hints at further growth.
3 Solid Picks
Here, we have highlighted three stocks that have not only performed better than the industry in the past three months but also boast solid prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Red Rock Resorts, Inc. (RRR - Free Report) stands to gain from strong spending per visit across its portfolio. Attributes such as strong and consistent visitation from guests, increased spending per visit, more time spent on gaming devices and a return of core customers have been adding to the positives. Also, it reported growth in food and beverage and hotel segments fueled by higher average checks and strength in the catering business. It intends to focus on business optimization and cost-reduction measures to drive growth. It also stated its intention to continue its investments in additional amenities, which include the opening of new high-limit slot and table rooms at its Green Valley Ranch properties in late 2023.
Red Rock currently carries a Zacks Rank #3 and has gained 5.4% in the past three months compared with the industry’s 2.3% growth. For 2024, the Zacks Consensus Estimate for RRR’s financial-year sales and earnings per share (EPS) suggests an increase of 10.5% and 17.9%, respectively, from the year-ago period’s levels.
Image Source: Zacks Investment Research
PlayAGS, Inc. (AGS - Free Report) is likely to benefit from robust Domestic EGM gaming operations, an expanding premium unit footprint, and strong performance in the Interactive segment. Their focus on premium games such as Bonus Spin Xtreme and PAX S indicates promising prospects. The company aims to venture into untapped markets and create new products for its table business. It maintains a positive outlook on EGM product demand, strategic business development efforts, and ongoing R&D progress. Expectations for the fourth quarter of 2023 involve solid pricing for Spectra 43, with anticipation surrounding the initial sale of Spectra 49 units and the inclusion of non-Spectra family units in the sales pipeline.
PlayAGS currently carries a Zacks Rank #3 and has gained 12% in the past three months. For 2024, the Zacks Consensus Estimate for AGS’ financial-year sales and EPS suggests an increase of 3.1% and 386.7%, respectively, from the year-ago period’s levels.
PENN Entertainment, Inc. (PENN - Free Report) is likely to benefit from omnichannel strength, technological investments and improvement in marketing capabilities. Management emphasizes reimaging its properties with best-in-class retail sports books, new games, refreshed hotel offerings and new third-party restaurant concepts to drive growth. Also, focus on strategic alliances bodes well. The company is optimistic with respect to integrations across ESPN's wide user base and strong media partnerships. In the future, it expects amalgamation to pave the path for new customer acquisition and organic cross-selling opportunities.
PENN Entertainment currently carries a Zacks Rank #3 and has gained 9.6% in the past three months. For 2024, the Zacks Consensus Estimate for PENN’s financial-year sales and EPS suggests an increase of 0.6% and 114.1%, respectively, from the year-ago period’s levels.