Casino Stocks Trend Downward Year Over Year

Casino Stocks Trend Downward Year Over Year

Inflation continues to ravage the US economy and no sector is safe, including the casino gaming market. Fears of an impending recession have put fear into consumers and investors alike, and casino stocks are beginning to suffer. According to data from the Wall Street Journal, several casino stocks are down over 50% year-over-year.

It’s not all doom and gloom, however. Though there has been a financial slide, commercial casinos across the US had their best April ever. Research from the American Gaming Association showed the industry posted $4.99 billion in revenue, up 12.4% year-over-year.

But looking at things on a micro-level, individual properties feel the squeeze.  

Casino customers are changing their spending

Derek Stevens, owner of three Las Vegas casino resorts, told CNBC, “we are definitely feeling the squeeze.” 

“Every weekend has been worse than the prior weekend,” Stevens said. “We have been feeling it now for a good ten weeks.”

Stevens said the most significant percentage decline is at bars, with slot machines and table games also experiencing a slowdown. However, the Circa Casino owner said reservations at his hotels are holding steady even without room discounts. 

Stevens added customers appear to be spending less on restaurants and extra amenities. 

“If you’re on the West Coast, you might have felt it a little bit quicker because of gas prices. You can immediately see it in discretionary consumer spending.”

Jim Allen, CEO of Hard Rock International and chairperson of Seminole Gaming, has spoken more openly about how Hard Rock views things. 

“We look at gasoline anywhere from $5 to $6 a gallon. There’s no doubt that in most regional gaming markets that customer is a day-tripper, utilizing gasoline to get to the facility. And when that’s up 30% to 40%, that’s going to be problematic.”

Allen speaks candidly mainly because the company is private and thus not subject to quarterly earnings calls. 

What other gambling operators are saying about inflation

Despite concerns from higher-ups like Stevens and Allen, other casino executives denied any slowdown in customer spending during Q1 earnings calls in April and May. 

On May 6, during its Q1 earnings call, DraftKings CEO Jason Robins said the company was seeing zero impact from inflation. 

“We are not seeing any impact from inflationary pressures on customer demand, and we continue to improve the user experience by adding breadth and depth to our DFS, mobile sports betting and iGaming products. We are also improving our efficiency in acquiring and retaining customers and have a strong pipeline of new jurisdictions to enter.”

After meeting with management teams in Las Vegas, Jefferies gaming analyst David Katz told investors it provided him with “evidence of the dichotomy between the current operating strength and the markets’ expectation of a recession.”

According to Katz, several operators say business levels continue to be “very strong” in Q2 and Q3, with strong bookings in 2023.

Those companies include:

MGM Resorts Inernational ($MGM)
Caesars Entertainment ($CZR)
Wynn Resorts ($WYNN)
Boyd Gaming ($BYD)
Golden Entertainment (Private)
Red Rock Resorts ($RRR)

Looking at individual gaming stock declines

Year-over-year percentage:

$CZR – down 61.4% 
$BALY (Bally’s Corp.) – down 64.6%
$PENN (Penn National Gaming) – down 63.3%
$MGM – down 33.5%
$BETZ (Roundhill Sports Betting & iGaming ETF) – down 53.2%
S&P 500 – down 13.2%

Now, DraftKings might be right. Maybe the online gambling company isn’t feeling the effects of inflation compared to a physical casino. But sports betting and online casino gaming are still considered amenities customers have to pay for. As we reach the slow season of sports perhaps more will be revealed during DraftKings’ Q2 earnings call. 

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Author: Tyler Gutierrez