Looking at end-of-the-year numbers, Truist Securities analyst Barry Jonas concluded that “regional trends were improving into year-end and December state reported [gross gaming revenue] data supports that.”
On the minus side of his February 4 investor note, Las Vegas was seen to be contending with tough comparisons with late 2023 and online sports betting was hampered by poor hold on NFL games. Still, Jonas foresaw a “solid” fourth quarter for Monarch Casino Resorts, Boyd Gaming, Churchill Downs, and the brick-and-mortar side of Penn Entertainment.
Jonas maintained Buy ratings on all companies in his coverage universe, except Station Casinos and Bally’s Corp., both rated Hold. He also raised his price target on Boyd from $85 per share to $88.
Fueling Jonas’ optimism was regional data that showed casinos up one percent in December and three percent in the fourth quarter of 2024. He indicated that first-quarter comparisons between 2025 and 2024 would be clement, given the severe weather that plagued early 2024.
Jonas elaborated, “Likely driven by positive calendar shifts, operators also mentioned a potentially healthier consumer post-election, lower gas prices, and generally better-than-expected performance against new competition.”
He also indicated that early 2025 would be better for interactive gambling than the soft late 2024. Both the final week of the NFL regular season and the playoffs “have been trending moderately more favorably, in our view, which should bode for a better contribution to Q1.” After underdogs and unders were “measly” in weeks 15 through 17 of football season, those teams won 32 percent of the time and covered the spread 50 percent.
Jonas cautioned, “January weather hasn’t been great so far, though last year appeared worse.” He added that Trump-administration and DOGE policies could have a chilling effect on government group-meeting business in Las Vegas. He also observed that federal job cuts might impair gaming revenues in the Maryland/Washington, D.C. area.
“While Q4 Vegas GGR trends were mixed (and locals positive), we wonder if the L.A. fires drive more population shifts to benefit Las Vegas,” Jonas wrote, finding an upside in the disaster. “Lastly, tariffs are a new dynamic to weigh on the market real-time and we think this will be a focus of investors trying to assess the direct (limited) and indirect (potentially more impactful) implications if they actually happen.”
Turning to individual companies, Jonas shook off HG Vora’s nomination of three (out of a total of nine) outside board members in Penn’s upcoming election. “Regardless, we think regional trends for PENN are improving; and as we highlighted in our upgrade, we believe there is unrecognized value in PENN’s interactive segment beyond ESPN Bet, which has yet to see a meaningful inflection.”
He also pointed to legislative action menacing Churchill Downs’s Virginia interests, while observing, “Management’s been extremely adept at successfully navigating these risks before.” The present risk is the possibility of a new casino being authorized for the northern tier of the Cavalier State, imperiling revenues at Churchill Downs’s new The Rose Gaming Resort, near Dumfries.
Jonas then chronicled, “Even if a N. VA casino makes its way through the Senate and House and is signed by the governor, it would likely have to go to the voters, which adds uncertainty for approval.”
Boyd, Jonas said, would set the tone for U.S. operators, as it would be the first to report fourth-quarter earnings on Feb. 6. Jonas hiked his price target on the strength of Boyd’s stake in FanDuel.
In Station’s defense, Jonas cited management’s report of a 12 percent increase in fourth-quarter cash flow. However, he remained cautious on the basis of poor sportsbook performance and upcoming construction interruptions at Station casinos.
Jonas left the two dominant Las Vegas Strip operators for last. Caesars Entertainment could see higher investment after a tough Super Bowl Week comparison. Caesars management “is confident on the business for 2025 and focused on driving shareholder value after a difficult 2024.”
As for MGM Resorts International, he felt it was in the same bucket as Caesars with regard to the Super Bowl. Both companies are competing with 2024’s game in their Las Vegas backyard. The 2025 Super Bowl is being held in New Orleans, where Caesars has some presence, but MGM none.