Casinos Once Again Saw Record Revenues in 2023
What happens in Vegas, stays in Vegas … with some exceptions.
Given its reputation for legalized sex work, we suspect syphilis — rates of which are at their highest level since the 1950s — doesn’t stay in Vegas.
We also presume that the record revenues generated by casinos also don’t stay in Vegas, because of the $66.5 billion raked in via gambling last year, much of it bolstered the books for publicly traded companies.
The former record — set in 2022 — was bested by 10% last year, according to the American Gaming Association.
Much of that had to do with legalized online sports betting, which entered several new markets last year, including Florida, Kentucky, Maine, Massachusetts, Nebraska and Ohio.
But good ol’ brick-and-mortar gambling remains the bread and butter of the industry. Last year in the U.S., slot machines generated $35.51 billion and table games produced another $10.31 billion, compared to sports betting’s $10.92 billion in legal wagers.
With the industry’s forecasted growth, stocks of some casino and resort operators could see exponential share appreciation — a development investors should keep an eye on.
Continuous Growth
The gambling market in the U.S. is expected to grow at a 9.53% compound annual growth rate (CAGR) through 2030, reaching $1.4 trillion.
Not only was 2023 a record-setting year for casinos, Q4 and the month of December set their own revenue records, with $17.4 billion and $6.2 billion, respectively.
This is solidifying a growth trend that has seen record revenues established for three consecutive years, with analysts expecting this trend to continue.
However, this isn’t having a uniform effect across the industry. Some of the biggest names in casinos and gambling are burning through cash and have seen shares struggle despite the broad uptick.
Today, we’re going to look at six stocks (and a bonus ETF), three of which are poised to see outsized profits and three which are best avoided. Always conduct your own due diligence, but take the following into consideration …
Getting Rooms Comped
1. Wynn Resorts (WYNN)
Cofounded by Steve Wynn, the company has six properties (two in Vegas, one in Massachusetts and three in China) with a seventh planned to open in the UAE in 2027.
WYNN has seen quarterly revenue skyrocket since 2022:
- Q4 2022: $423 million
- Q1 2023: $767 million
- Q2 2023: $913 million
- Q3 2023: $1.67 billion
- Q4 2023: $3.96 billion
The $11.16-billion market cap company has a TTM free cash flow of $1.62 billion, good for a 50% year-over-year increase.
It next reports earnings on May 7 and has a consensus EPS forecast of $1.24. If they exceed that, it’ll mark the fifth consecutive quarter the company has done so.
Shares are down -11% over the past year but are up 5.62% in 2024. Currently trading at $100, the average one-year price target is $117.29 with a high-end estimate of $135 and a low-end estimate of $96.
Bonus: WYNN pays a dividend yielding 0.99%, or 25 cents per quarter.
2. Red Rock Resorts (RRR)
Located in the Las Vegas Valley, the 796-room resort/casino is the main driver behind the $5.99-billion market cap company, which saw its revenue grow 35% between Q3 2023 and Q4 2023.
It next reports earnings on May 1 and has a consensus EPS of 43 cents. Between Q4 2022 and Q4 2023, RRR increased free cash flow by 240% from $32 million to $109 million.
Shares are up 28% over the past six months, 6.91% in 2024 and 101% over the past five years. Currently trading at $51, the average one-year price target is $63 with a high-end estimate of $75 and a low-end estimate of $55.
Bonus: RRR pays a dividend yielding 1.76%, or 25 cents per quarter.
3. Las Vegas Sands (LVS)
Founded in 1988, LVS has a market cap of $38.3 billion, making it comparable in size to Prudential, Yum! Brands, 7-11 and Hershey.
Receiving a “Strong Buy” based on 13 analysts’ ratings, LVS next reports earnings on April 24 and has a consensus EPS forecast of 62 cents.
The company’s Q4 2023 revenue of $2.92 billion was a 62% increase over Q4 2022’s $1.12 billion, and its free cash flow increased 164% over the same period to $2.21 billion.
Shares are down -13% over the past year but are up 0.12% in 2024 and 22.6% since the March 2020 COVID-induced recession. Currently trading at $51, the average one-year price target is $63 with a high-end estimate of $75 and a low-end estimate of $55.
Bonus: LVS pays a dividend yielding 1.58%, or 20 cents per quarter.
The following chart illustrates the three-month performance of WYNN (dark blue), RRR (orange) and LVS (light blue):
Going Home With Empty Pockets
Other big names operating in this space don’t hold up compared to the three aforementioned companies.
1. MGM Resorts (MGM)
Revenues increased 18% from 2022 to 2023, but MGM hasn’t translated that into the same gains for net income, which only increased 15%. The company doesn’t pay a dividend and shares are down -5.56% in 2024, -3.2% over the past year and are only up 15% over the past three years.
2. Caesars Entertainment (CZR)
The company’s EPS forecast for this quarter is 4 cents (up from -63 cents last year). It doesn’t pay a dividend and shares are down -10% in 2024, -23% over the past six months and -64% since hitting its all-time high in October 2021. Despite record gambling revenues last year, the company only managed to increase its revenue by 0.35% in 2023.
3. Bally’s (BALY)
Consensus EPS calls for an abysmal -94 cents when Bally’s next announces earnings on May 15. The company doesn’t pay a dividend and its TTM free cash flow is -$165k. Shares are down -18% in 2024, -33% over the past six months, -46% over the past year and -635 over the past five.
The following chart illustrates the three-month performance of MGM (dark blue), CZR (orange) and BALY (light blue):
A Bonus ETF
If you’re hesitant to invest in an individual casino stock, we recommend and ETF that provides broad gambling exposure.
The Roundhill Sports Betting & iGaming ETF (BETZ) has $95 million in AUM and its top holdings include DraftKings, Kindred Group and Flutter Entertainment, which owns brands like FanDuel, PokerStars and Sportsbet.
Shares are up 4.57% this year and 25% since hitting its one-year low in October 2023.