Although stock analysts expected a weakening in U.S. consumer discretionary spending, Jefferies Equity Research analyst Kai Erman said that demand for slot machines remains strong. His findings were published in an April 30 investor note.
Erman allowed that regional gambling revenues have been “choppy in some areas,” but said that was balanced by strength in Nevada and other critical markets. The analyst predicted a “sequential step-up” in March casino grosses from a “weaker” February, whose results he dismissed as the result of poor weather and no Super Bowl in Las Vegas.
Las Vegas casino receipts were down four percent in March, but Erman noted that slots were up 4.5 percent. He also pointed to positive commentary from Caesars Entertainment and Boyd Gaming, the former saying Vegas room reservations were “pacing at record levels” and the latter reporting stable customer behavior.
“Market demand remains strong and lack of meaningful competition [excluding Light & Wonder] remains a major volume tailwind,” Erman wrote. “Land-based setup is undemanding for [Aristocrat Leisure], and we see upside to both valuation and consensus estimates as consensus and investors become more comfortable in the level of US land-based demand.”
He concluded that slots continue to outperform table games and all other iterations of gambling. As U.S.-derived numbers continue to improve, he wrote, he was gaining confidence in Aristocrat’s near-term prospects “despite investor and recessionary fears.”
