Off to the races
Gaming sector share prices melt up in April
Double-digit gains on lessened trade war fears and robust trading.
In +More: Bally’s in Chicago trouble.
Sporttrade’s Kane lays out his case for going down the predictions road.
Earnings edit: Red Rock, the gaming REITs.
The teardown: How Las Vegas can weather macro instability.
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Mixed signals
The boy who cried wolf or the canary in the coalmine? Among the leading gaming stocks where high teens or bigger double-digit gains were common last month, Churchill Downs stands out with a 9% decline.
Comments during its Q1 call at the end of April suggested the company was seeing consumer “hesitancy” ahead of this past weekend’s Kentucky Derby.
King for a day: This pessimism would seem to have been undermined by its Kentucky Derby performance. The company said wagering from all sources on the day of the Derby – won by Sovereignty – set a new record of $349m, beating last year’s $321m.
All-sources handle for Derby Week rose to a new record of $474m, beating last year’s record of $447m.
The only slight negative was that adj. EBITDA for the week will be $2m-$4m lower than last year’s running.
Standing out: Following CEO Bill Carstanjen’s wary comments on the Q1 call, the share price collapsed by 16% on the day and ended the month down 9%, an unfortunate negative performance in a sea of positives for April.
Back off the floor: Indeed, gaming stocks exposed to the US consumer enjoyed a startling rebound during April. Bouncing back from their ‘Liberation Day’ lows at the start of the month, the leading names within the sector all saw mid-teens or better returns.
Caesars Entertainment was up 20% for April, buoyed by commentary from its earnings call that it was not seeing the softness that investors “seem to be worried about.”
MGM Resorts was up 19% for the month, again helped by soothing words from the company’s earnings call about April setting records at its Las Vegas properties.
Boyd Gaming climbed 15% during the month, again boosted by comments from CEO Keith Smith that it had “not seen any meaningful shift in consumer behavior.”
Top of the tree: Winning the race in terms of share gaming in April was Super Group, which soared 42% for the month. It reports its Q1 numbers on Thursday (see ‘The week ahead’ below).
It was closely followed by Entain, which with Stella David now confirmed as permanent CEO climbed 32%.
Fellow UK-listed Evoke also managed a 28% return on the month.
The winner in terms of market cap gain was sector leader Flutter, which added 20% or $12bn to its market cap during April, leaving it valued at $44bn as of Friday.
It is an altogether better backdrop for the company’s Q1 earnings call due on Wednesday.
The week ahead: Also reporting this week will be sports data and services provider Genius Group, up 26% last week, and Wynn Resorts (+18%) on Tuesday, while alongside Flutter on Wednesday comes Lottomatica, up 17% last week, and Light & Wonder (+15%).
On Thursday, Penn Entertainment, up 12% last week, will report alongside the aforementioned Super Group, Inspired, Full House and Golden Entertainment.
Also AMC on Thursday, DraftKings reports its earnings with the accompanying call coming BMO on Friday.
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+More
Bally’s is reported to have been forced to halt construction on its permanent $1.7bn Chicago casino after it emerged that one of its contractors was using an unauthorized vendor. According to the Chicago Sun-Times, the Illinois Gaming Board ordered building on the casino to stop after it was reported D&P Construction, which had alleged ties to the mob decades back, was providing dumpsters to the casino site.
PointsBet confirmed late last week that it had received a confidential proposal from the Australian betr Entertainment and was in the process of evaluating the proposal. The statement added that it was seeking clarifications from betr in relation to aspects of the proposal but remained committed to the rival proposal for Mixi.
Meanwhile, Hard Rock Digital is reported to have applied for an Ontario iCasino license in connection with the contingent offer for PointsBet’s Canadian business as per the betr offer.
Rivalry: The Gen Z-focused and esports-led operator insists there is “no insolvency proceeding against it” after it admitted it had failed to file its FY24 results ahead of the April 30 deadline. The company now has until June 30 and said it “remains confident in its ability to complete the annual filings by this date.” The CEO and interim CFO will be prohibited from trading securities of the company until the annual filings are completed.
Predicting the future
If you can’t beat ‘em: Sporttrade’s CEO Alex Kane suggested his company was in danger of seeing an opportunity for which his betting exchange was arguably built slip away if it didn’t explore the potential for launching prediction markets.
“If we didn’t state our intent, we risked having everything just pass us by as we sat on the side of the road,” he said.
Please sir: Kane spoke to E+M after it emerged via a Sportico article that the company had sent a letter to the Commodity Futures Trading Commission formally requesting federal approval to offer its product nationwide.
In the letter, Kane complained that the existence of Kalshi, Robinhood and Crpyto.com was causing “irreparable harm” to his own company’s prospects.
This is who we are: Talking to E+M, he expanded on this point. He noted the similarities behind Sporttrade’s exchange market and the prediction markets offered under the banner of the CFTC and said his company should “participate in that because it is everything we believe in.”
He added it would be “antithetical” for Sporttrade to demand that prediction markets be shut down.
“I think there is an excellent opportunity to apply everything we have built that we would love to have on the open waters, stretching out the sails. It is what we have been built for,” he added.
“We want to be champions for change and differentiation for consumers.”
Kane noted Sporttrade has been stymied in its attempt to roll out exchange markets state-by state, to date only managing to get licensed in four states. “This isn’t a pivot,” he added.
“We previously interfaced with the CFTC,” he said. “We have spoken with other brokers and we always left like the market would head toward this route, to efficiency and intermediation.”
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The earnings edit
Red Rock Resorts
Locals hero: Red Rock will withstand any potential economic downturn, particularly if it were to be a “typical recession,” according to CFO Stephen Cootey, which in the past have seen the company manage to grow rather than contract.
“The customer values convenience, proximity and affordability,” he added.
“And that supports consistent visitation even in softer economic environments, which is slightly different from the way the Strip reacts during a recession.”
The company produced record results, defying fears over the immediate macro picture, with the new Durango property just lapping its opening period this time last year.
Despite some cannibalization of the Red Rock property itself, Cootey said the new property was contributing to the growth of the entire Las Vegas locals market.
See Friday’s Earnings Extra edition (PRO subscribers only).
The gaming REITs
Checking for a pulse: Neither of the gaming sector REITs – VICI Properties and Gaming & Leisure Properties – are fully enjoying life currently, with a notable slowing of the deal pipeline in Q1 being the common ground between the two. Ed Pitoniak, CEO at VICI, summed up the current mood as being typified by “diminished animal spirits.”
On their tail: While deals are being completed – North Fork for VICI and Bally’s Chicago for GLP – these are not the large cap sale-and-leaseback arrangements of recent years.
Still Peter Carlino, CEO at GLP, said the company’s job was to “stay close to opportunity and basically never give up.”
VICI is the most exposed to Las Vegas, which COO John Payne suggested had “unique demand drivers” that would see it weather any macro storms.
Meanwhile, Steven Ladany, chief development officer at the more regionally focused GLP, said operators would need to be “attentive to trends” going forward.
Out of their comfort zone: Both GLP and VICI are now involved with deals involving tribal gaming, despite what Pitoniak suggested were “nuances” the company was attempting to get “comfortable” with.
See today’s Earnings Extra edition (PRO subscribers only).
The teardown
We can take it: After having a sit down with the management team at MGM Resorts, the team at CBRE laid out just why they think Las Vegas will weather whatever macro instability that might be thrown at it in the coming months.
No room at the inn: First, they pointed out that relative to the Great Financial Crisis of 2008, Las Vegas has relatively less room supply growth coming on stream.
Rooms under construction currently amount to ~1.5% of existing inventory.
You gotta see this: Second, they noted Vegas has more drivers for visitation now than it did previously, including a “more mature and diversified” conference attendance and meeting sector.
This includes a “very strong” sports tourism schedule including in particular the draw of the raiders and the NFL.
Test of loyalty: For MGM specifically, meanwhile, the Marriott partnership is already reaping rewards with the company seeing over 200k rooms booked via the deal in Q1 and with evidence that these customers are spending more on F&B and other amenities than the displaced transient trade.
The CBRE team suggested that ~8% of total room nights comes via the Marriott deal.
But they see the potential for further penetration as MGM explores ways to possibly expand the partnership.
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Upcoming earnings
May 5: Accel Entertainment
May 6: Genius Sports, Wynn Resorts
May 7: Flutter Entertainment, Raketech, Light & Wonder, Lottomatica
May 8: Super Group, Penn Entertainment, Inspired Entertainment, DraftKings (earnings), Full House, Golden Entertainment
May 9: DraftKings (call)
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