Gaming stocks took a ride along with the 2,100-point surge by the Dow on Wall Street Tuesday on hopes the industry will be a party to an estimated $2 trillion stimulus package to help offset losses incurred due to the nationwide COVID-19 coronavirus pandemic.
The help is needed, according to one Wall Street analyst.
Macquarie Securities gaming analyst Chad Beynon said that eight casino operators are burning through a combined $27.5 million a day as they endure a nationwide gaming industry shutdown due to the coronavirus outbreak. The companies currently have zero revenues and cash flow while still covering employee salaries, debt obligations, and other expenses.
MGM Resorts International, which closed all 20 of its casinos in eight states, is spending $14.4 million a day. Beynon estimates the company will run out of cash nine months.
Beynon said the gaming industry has been one of the hardest-hit sectors among the consumer groups since the outbreak began.
Gaming stocks are now down 69% year to date on average, versus (the) total consumer space down 54% and the S&P 500 Index (down) 25%,” Beynon wrote in a note to investors Sunday. “The casino shutdown domestically, coupled with high debt loads, is pushing investors to ask how long can these balance sheets last in this current environment?”
Congress and the Trump administration debated a potential stimulus package to address economic fallout from the coronavirus’ spread throughout the day Tuesday.
Beynon said Penn National and Full House Resorts could each last a little more than five months if the shutdown continues into the summer. Penn, which operates 41 casinos in 19 states, is burning through $6.4 million a day and Full House, which has five properties in four states, is going through approximately $200,000 a day.
Monarch Resorts, Red Rock Resorts, and Golden Entertainment have the best balance sheets to survive closures for up to a year or more. Monarch, which has casinos in Reno and outside Denver, is spending $300,000 a day, Red Rock is spending $1.7 million a day to maintain its 20 properties in the Las Vegas area, and Golden is spending $1 million a day to maintain the Strat, its eight other Nevada properties, and the Rocky Gap in Maryland.
“Just about all casinos are now closed for 30 days at least and investors are punishing the gaming stocks,” Beynon said. “Recent price movements imply cash flow declines anywhere from 9% to 49% across the gaming space.”
Some hope arrived Tuesday as the market bounced back to post its largest one-day climb since 1933.
MGM Resorts closed up 33.11% to $12.18 and Las Vegas Sands increased 3.20% to $44.84. Penn National was up 34.805 to $13.21, Red Rock Resorts increased 15.52% to $8,71, Boyd Gaming was up 23.34% to $15.01 and Golden Entertainment was up 51.76% to $6.48.
Investors following the pending $17.3 billion merger between Eldorado Resorts and Caesars Entertainment were hopeful the spike in the companies stock prices Tuesday was good for the deal, which has been expected to close sometime in the next three months.
Eldorado shares closed at $15.05, up 44.15%, and Caesars increased by 2.49% to $6.18.
Deutsche Bank gaming analyst Carlo Santarelli told investors he believes the deal will ultimately move forward.
“We think the deal is likely for several reasons, including… (that) the committed financing from the banks is firm and we don’t see the banks backing away,” Santarelli said.
Monarch increased 16.61% to $22.39, Full House was up 27.50% to $1.02, and Century Casinos grew 70.62% to $2.73.
Boyd Gaming also announced Tuesday the closures of properties in five states – Illinois, Indiana, Louisiana, Ohio, and Pennsylvania – had been extended into April by either the governor or state regulatory bodies.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
