Casinos in the region and local areas are reportedly steady, according to an analyst from Deutsche Bank.
Deutsche Bank analyst Steven Pizzella has expressed a cautiously optimistic outlook on the gaming industry, with a focus on companies like Caesars Entertainment and Station Casinos. Pizzella's remit includes a variety of companies in the gaming sector, including Brightstar Lottery, Boyd Gaming, DraftKings, Golden Entertainment, Gaming & Leisure Properties, Light & Wonder, Las Vegas Sands, MGM Resorts International, Penn Entertainment, Station Casinos, Vici Properties, and Wynn Resorts.
Caesars Entertainment: Strong Digital Momentum
Pizzella highlighted Caesars Entertainment as a company with strong digital momentum, particularly in iGaming and sports betting. The company is on track to deliver over $500 million of EBITDA from digital by 2026, with iCasino growing at about twice the rate of peers and sports betting handle increasing year over year after some strategic marketing refinements. Caesars' rated gaming (high-value customers) showed an 8.5% Theo growth in the quarter, the best in three years, indicating improving profitability despite softer Vegas market dynamics.
Las Vegas Strip: Patience Required
On the Las Vegas Strip, Pizzella observes depressed investor sentiment due to tepid visitation and declines in metrics like RevPAR (revenue per available room). He expects summer rate pressures on average daily room rates and suggests patience is required, as macroeconomic factors such as interest rates will constrain near-term stock upside. However, he retains a bullish long-term view for 2026-2027, anticipating growth in occupancy, rates, and fixed recurring revenues that should compound in the low to mid-teens annually.
Wynn Resorts and Macau: Strategic Recovery
Regarding Wynn Resorts and Macau, Pizzella highlights a strategic recovery driven by Macau’s 8.3% year-over-year gross gaming revenue growth. Wynn's investments in property upgrades and entertainment are diversifying its revenue mix. Deutsche Bank raised its price target for Wynn, citing strong EBITDAR margins and a favorable VIP win rate, positioning the company well to benefit from the Macau rebound and global tourism trends.
Sports Betting: Profitability is Key
On the sports betting front, Pizzella stresses the importance of profitability inflection. For example, MGM’s BetMGM joint venture reaching profitability helped support MGM’s attractive valuation. This underlines his emphasis on operators who can cultivate profitable digital and sports betting platforms as a key growth area.
Regional Casinos: Growth Ahead
Pizzella perceives firmness in the Las Vegas locals sector, which he believes is underpinned by stiff barriers to entry for would-be competitors due to population growth and recent legislative gains. Regional casinos are expected to continue smoothly or even lift, according to Pizzella, due to their drive-to market positioning. The renewed Caesars Windsor management contract, starting next year, is another undervalued asset.
Long-term Secular Winners: Sportradar and Genius Sports
The analyst views sports betting data providers like Sportradar and Genius Sports as "long-term secular winners." Deutsche Bank research shows that in May, regional properties were up 4.1 percent after dipping one percent across the preceding four months.
Challenges Ahead
Pizzella described the gaming industry as balanced over the next twelve months, with positive momentum and stability being curbed by numerous legislative, geopolitical, and economic risks. He is particularly concerned about consumer volatility, unstable international politics, potential rising tensions in China, limited longer-term investor interest in Macau, tariffs' ability to hinder the return on investment from large capital projects, and the inflation of consumer prices.
In summary, Pizzella recommends focusing on gaming companies that can execute profitable digital and sports betting strategies (e.g., Caesars, MGM/BetMGM), watch the Macau recovery (Wynn), and be patient with Las Vegas Strip operators dealing with macroeconomic headwinds but poised for long-term growth. He also sees potential in long-term secular winners like Sportradar and Genius Sports.
- Considering Deutsche Bank's analysis, it seems that Caesars Entertainment and Wynn Resorts, along with the casino-and-gambling sector more broadly, have a focus in digital strategies, with strong growth expected in iGaming, sports betting, and other digital platforms (finance).
- In addition, Pizzella highlights sports data providers like Sportradar and Genius Sports as potential long-term secular winners, demonstrating a broader interest in the finance aspect of the casino-and-gambling industry, particularly in digital and data-driven aspects (casino-and-gambling).
