Investors have a lot of wildcards in the casino sector as the Q1 earnings season rolls along and macroeconomic headwinds continue to whip up.

Las Vegas Strip trends

Las Vegas Strip gross gaming revenue saw a rare drop in March against a tough comparable a year ago that included UFC 285, Taylor Swift concerts at Allegiant Stadium, local NCAA tournament games, and the triennial ConExpo-Con/Agg convention. Looking ahead, Macquarie analyst Chad Beynon expects Strip gross gaming revenue to continue to moderate, but sees further growth in non-gaming given the programming from sports, entertainment, and a strong convention calendar. “Further, we maintain our bias toward the high end, as we believe the high-end luxury consumer continues to have a willingness to spend, while lower-income consumers may be feeling the pinch,” he noted. The biggest Las Vegas Strip operators of all are due to report earnings next week. Caesars Entertainment (NASDAQ:CZR) heads into the earnings confessional on April 30, followed by Caesars Entertainment (CZR) MGM Resorts International (NYSE:MGM) on May 1.

Regionals

Regional casinos have been facing headwinds this year, headlined by high interest rates, persistent inflation, and a return to promotional activity. Boyd Gaming (BYD) kicked off the earnings season for regionals with a Q1 report that included year-over-year drops in revenue, EBITDAR, and EPS amid tough weather conditions in the Midwest and South. In terms of valuation, Boyd Gaming (BYD) has the lowest price-to-earnings ratio in the sector after its 16% share price slide. MGM Resorts (MGM) has the lowest price-to-free cash flow ratio. Penn Entertainment (PENN) has the highest short interest as a percentage of total float.

Sports betting calendar

DraftKings (NASDAQ:DKNG) will report earnings on May 2 in what will be a closely-watched report for related stocks such as Flutter Entertainment (FLUT), Genius Sports (GENI), and BetMGM owners MGM Resorts (MGM) and Entain (OTCPK:GMVHF). Analysts expect DraftKings to disclose revenue of $1.12B, adjusted EBITDA of $2.2M, and EPS of $-.011 as the sports betting giant continues to flirt with profitability. Investor sentiment has been bullish on the growth track of the sports betting sector, but concerns about heightened competition are still in the mix. On top of new U.S. states being in the mix, sports betting volume could get a significant boost this summer in comparison to a year ago due to the Paris Olympics and the month-long European Football Championship.

Talking REITs

VICI Properties (VICI) and Gaming and Leisure Properties (GLPI) have both seen double-digit share price drops in 2024 amid broad concerns over the economy and interest rates. However, both are still highly rated by Wall Street analysts and Seeking Alpha analysts. CBRE Equity Research reiterated a Buy rating on VICI and pointed to increased conviction in the growth outlook. Analyst John DeCree said VICI acquiring the Centaur assets (land and real estate associated with Harrah’s Hoosier Park and Indiana Grand properties) is still a high probability outcome, but he does not see it as the only good outcome. “The company has a deep growth pipeline outside of Centaur, and the option is just that, an option,” he noted. Meanwhile, Seeking Alpha analysts Sanjay Chandiramani had a deep dive last month on why Gaming and Leisure Properties (GLPI) is a worthwhile addition to a portfolio. Casino REITs can be attractive to income investors. VICI Properties (VICI) has a 5.81% dividend yield, while Gaming and Leisure Properties (GLPI) has a dividend yield of 7.00%.

What the quants say

The stocks related to the casino, sports betting, and gaming sectors with the highest Seeking Alpha Quant Rating are Evolution AB (OTCPK:EVVTY), Super Group Limited (SGHC), Sportradar (SRAD), PlayAGS (AGS), MGM Resorts (MGM), Red Rock Resorts (RRR), VICI Properties (VICI), and Red Rock Resorts (RRR). Meanwhile, the lowest Seeking Alpha Quant Ratings in the sector are on Esports Entertainment (OTC:GMBL), Century Casinos (CNTY), and Melco Resorts & Entertainment (MLCO). Read about the track record of Seeking Alpha’s Quant picks.