Las Vegas casino stocks seen as good bets to ride out economic downturn

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Macquarie Research believes that Las Vegas casinos are in better shape to weather an economic downturn than they have been in the past due to lower cost structures and tight market supply.

Analyst Chad Beynon and his team also pointed to strong pent-up demand for business travel and conferences, which should help offset weaker leisure consumption. Vegas searches are also noted for showing continued growth.

“Despite fears about peak demand in Las Vegas, our monthly survey highlights continued demand for tours through the fall. Overall searches were +3% MoM in July, down from 6% /5% in May/June, with continued strength in search Aug/Sept Visits in Feb-June were 10% below 2019 levels.”

Macquarie’s view of the casino industry is that while gross gaming revenue and margins will attract attention, the recent round of earnings reports have shown how non-gaming revenue can drive increased gambling. ‘EBITDA for the group with MGM Resorts (NYSE: MGM), Caesars Entertainment (CZR) and Wynn Resorts (WYNN) all report Vegas occupancy rates above 90%.

Las Vegas Revenue Composition: MGM Resorts (MGM) has the highest revenue exposure to Las Vegas at 47%, followed by Caesars Entertainment (CZR) at 45%, Vici Properties (VICI) at 30%, Golden Entertainment (GDEN) 25%, and Wynn Resorts 23%. Boyd Gaming (BYD) and Red Rock Resorts (RRR) are also indirectly exposed to the Strip’s fallout.

Find out which casino stocks have the highest Seeking Alpha Quant odds.

Compare valuation and profitability metrics on MGM, CZR and WYNN.

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