Persistent Economic Uncertainties and Travel Restrictions Benefit Gaming Stock Sector, Suggests Analyst
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Spread this knowledge stone cold The bear market has gotten the best of gaming stocks, but John DeCree, the slick director of equity research at CBRE, isn't sweating it.
Over the past year, the casinos-and-gaming subcomponent of the S&P 500 has taken a beating, underperforming the overall index and almost all of its counterparts. But, according to CBRE analysis, this struggling segment is now the second cheapest component of the index, trading at a modest 6.5x projected fiscal-year 2026 EBITDA.
DeCree thinks the casino and gaming group is looking more enticing than ever to investors, despite the increased risk of a recession and volatility in the market. "Although we expect market volatility to remain high, and price action to be dictated by headlines rather than fundamentals, we do see some tactical opportunities to invest in this space," he said in a note to investors.
A potential threat to the Vegas Strip's fundamentals could come from a dip in international visitation, DeCree warns. While international visitors account for a smaller percentage of total visitors than before, Mexico and Canada combined make up more than half of all international visitors to Las Vegas, with travel forecasted to drop steeply.
"We currently estimate a relatively minor impact to net revenue and EBITDA for Strip operators from a moderate decline in international visitation, and remain optimistic that the largest operators could use their loyalty programs and player databases to fill any lost room nights," DeCree said.
DeCree also has faith in the locals' market's resilience, believing it's better equipped to handle a recession today than in the late 2000s. Thanks to supply shrinkage and population growth, the gaming supply per resident in Las Vegas is significantly lower than in 2007.
Investors seeking some cover could find Boyd Gaming a solid bet. "One of the more defensive names in our domestic gaming group," DeCree recommends Boyd Gaming stock as a "shelter from the storm."
For long-term optimists, CBRE suggests Wynn Resorts as a steal at 7.6x forward EBITDA, despite potential short-term turbulence and the China risk lingering in the distance. The opening of Wynn Al Marjan Island in 2027 promises a refreshing growth catalyst.
Similarly, DeCree thinks Red Rock Resorts is offering up a discounted valuation, with its high-quality real estate in the locals' market and an enticing long-term growth pipeline through several Las Vegas development sites. The locals market, which DeCree believes will prove more resilient than in prior recessions, could be a welcome beacon in choppy waters.
Enriching your strategy,
- John DeCree's recent analyses focus on international opportunities. However, his insights on market dynamics and sector resilience provide tactical insights for US commercial casino investments.
- Macau's US-based operators remain crucial to the region, contributing over 80% of tax revenue and employing 14% of the workforce. This emphasizes the strategic importance of scale and economic integration, principles that US operators can leverage with large footprints in key markets like Nevada or New Jersey.
- US operators should stay alert for federal or state stimulus measures aimed at rebooting discretionary spending post-tariff tensions or economic slowdowns.
- Investors could prioritize operators with global luxury portfolios, like Las Vegas Sands or Wynn, to hedge against domestic cyclicality.
- Geopolitical stability remains a comparative advantage for US-based gaming assets, making operators less exposed to cross-border trade tensions an attractive prospect for investors.
- DeCree's analysis of Wynn's UAE head start underscores the value of first-mover advantage in emerging domestic markets, such as online gaming expansion or new state legalizations.
- US operators with robust balance sheets, like Las Vegas Sands, could reallocate capital from undervalued international assets (e.g., Macau) to high-growth domestic projects if sentiment takes a turn for the better.
- Despite the struggling casinos-and-gaming subcomponent, John DeCree from CBRE believes it's now the second cheapest component of the S&P 500, providing investment opportunities.
- DeCree recommends Boyd Gaming stock as a "shelter from the storm," citing it as one of the more defensive names in the domestic gaming group.
- For long-term optimists, CBRE suggests Wynn Resorts, offering a discounted valuation of 7.6x forward EBITDA, despite potential short-term turbulence and the China risk.
