Sin City
What happens in Vegas… also impacts U.S.-listed casino stocks. This sector that has stood the test of time enjoyed a little winning streak this year.
U.S. indices tumbled last week as consumer sentiment data and fresh tariff threats revealed rising concerns about the economy. Contributing to a sell-off last Thursday was Walmart ($WMT): the legacy retailer shared cautious guidance and lost out to e-commerce behemoth Amazon ($AMZN) in sales for the first time (as flagged right here).
In the bricks and mortar vs online battle, casino and gambling stocks have been proving you can have your cake and eat it too – if you play your cards right. They were some of the best performers YTD.
MGM Resorts ($MGM) and Caesars Entertainment ($CZR) might be household names on the Vegas strip, but lately their winnings have been tied to their online sports betting platforms. BetMGM reported US$2.1b in net revenue, with Q4 EBITDA trending towards breakeven. Meanwhile, Caesars Digital reported a 40.9% YoY increase in revenue last quarter, largely driven by iGaming and sports betting.
But the standout performer this year has to be DraftKings ($DKNG), which proved that the number 13 really is lucky for some. Shares in the independent online sports betting platform gained 47% between 1 Jan and its earnings report on 13 February – also the day it turned its first profit in 13 years.
Of course, that doesn't include the hit to its margins from NFL punters who got their bets right. Its rival FanDuel, owned by Irish-American firm Flutter Entertainment ($FLUT), is in the same boat. Flutter expects its EBITDA to be US$205m lower as a result of the NFL season, which generated an ‘adverse gross gaming revenue’ impact of US$438m.
Firms in this sector are in the business of risk, and there’s no denying that investing in them can be risky business. When discretionary spending is trending lower, these stocks are usually the first to feel it – which is pretty much what happened last week.
For those tying their fortunes to ringmasters in Vegas though, this month will be one for the books. The NRL, UFC and NASCAR are just some of the brands bringing power-packed events to Vegas over the next few weeks. And regardless of what happens with share prices, it's a fair bet that these companies round out the month in the black.
