Second-quarter earnings season starts Wednesday and kicks off in earnest next week, when a lot of questions will be answered about Las Vegas, regional casinos and Macau. Bank of America is projecting upside for Macau and regional casinos, strength in online sports betting, and downside on the Las Vegas Strip.
Shaun Kelley, a research analyst for BofA, said his firm is 2% above Wall Street estimates for Macau and 1% above for regional casinos, though below Wall Street for the Strip.
“Our second-quarter estimates are slightly below the Street, driven by softer revenue per room,” Kelley said. “Our room rate survey also looks weak, down -11% on a forward rolling-three-month basis. We’re more cautious on the Las Vegas Strip and are 1% below the Street, noting that our monthly shows a very soft June across metrics.”
Kelley said their estimates for Las Vegas locals casinos are in line with consensus.
Based on early June data, Kelley estimates that same-store regional-casino trends are up 1% year over year versus 5% in May, with the deceleration driven by a weekend day shift.
“We’re 6% ahead for Boyd’s Midwest & South segment and note strong recent trends for Caesars, which is outperforming, up 5% year over year in June so far,” Kelley said. “That said, their reported revenue growth could be weaker than state data, given weakness in Tahoe and Mississippi, where property-level detail isn’t available, and increased promotions to drive market share.”
About Macau, Kelley said investors are getting “much more constructive” on potential second-half growth, given a recent revenue acceleration in May and June.
“Recent gaming revenue data has been strong, but we think promo could tick up as some of the recent strength has been VIP driven. We’re raising our second-half outlook for Macau and now model gaming revenue up 5% year over year to reflect a continuation of recent trends.”
Kelley said online sports betting hold in June was solid for the second month in a row, while promotions remained low. Positioning is positive and should drive potential material upside to consensus. DraftKings is holding at 12% with June data so far and second-quarter EBITDA of $250 million to $300 million is expected, with investors leaning toward the higher end.
“While second quarter trends are solid, we think DraftKings will have to include $90M of additional headwinds from $50M of Missouri launch costs and $40 million of incremental tax headwinds, which we think will be mostly offset by a strong second quarter,” Kelley said.
Monarch Casino & Resort will be the first when it puts out a press release of its earnings.
Next week, Las Vegas Sands hasn’t scheduled a release date, but typically leads the way among the casino operators holding earnings calls.
Churchill Downs and Boyd Gaming will hold earnings calls on July 24. Boyd will provide clues about the neighborhood casino market in Las Vegas and discuss its decision, announced July 10, to sell its 5% stake in FanDuel for $1.75 billion.
Analysts continue to come out on the deal. Daniel Politzer of J.P. Morgan said they’ve stayed neutral and kept their price target at $79 for December. The stock was trading around $85 to $86 before the announcement and has been hovering in the low $80s since then.
“Many investors we spoke with were frustrated by Boyd’s underperformance, claiming Boyd’s stock did not reflect much credit for the 5% FanDuel stake,” Politzer said.
He noted that Boyd was among the only brick-and-mortar gaming stocks whose valuation multiple has held up, trading in line with its three-year average EV/EBITDAR multiple that Boyd was getting above market-level access fees, so the lower fee reset was expected. But many didn’t anticipate Boyd moving to a flat fee structure that’s now 90% lower, he said.
Boyd, however, received a sizable premium of $205 million for its lower market-access fees, but that’s modest, given three years of remaining access fees totaling $200 million, Politizer said.
“The second-quarter setup appears favorable, though we wouldn’t be surprised to see estimates move higher,” Politizer said of the upcoming Boyd earnings report. “We expect investors to focus on drivers of improving regional gaming-revenue data, impact of the online sports betting market, labor costs/margins, capital-allocation priorities, any shift in M&A appetite given third-quarter proceeds from 5% FanDuel sale, and capital projects that could support Boyd’s growth profile.”
Other earning reports will be released through August 7: GLPI on July 25; Red Rock Resorts on July 29; Caesars Entertainment on July 29; MGM Resorts International on July 30; VICI Properties on July 31;and Penn Entertainment, Wynn Resorts, and Full House on Aug. 7.
Bank of America has set its price targets for casino stocks and one sports betting company ahead of operators releasing their earnings.
Kelley raised their Las Vegas Sands price outlook to $52.50, Wynn Resorts price outlook to $125, and MGM Resorts International to $40, based on what they see as strength in Macau.
Wynn stock has been on the rise over the last month by some $22 and closed Tuesday at $111. It’s up $27 so far this year.
“Our $125 PO is based on approximately 10x our 2026 EBITDAR estimate plus value for (Wynn’s resort project under construction in the) UAE,” Kelley said. “The multiple roughly in line with its long term average, justified given strength in Las Vegas (for luxury brands) and stable regional trends.”
MGM closed at $37.72 on Tuesday and is up only $4 so far this year.
“Our $40 PO is based on approximately 7x our 2026 EBITDAR estimate,” Kelley said. “This multiple is a discount to MGM’s historical average since 2010 due to the company’s evolving corporate structure.”
Las Vegas Sands closed at $49.86 on Tuesday and is flat so far this year.
“Our $52.5 PO is based on approximately 12x our 2025 EBITDAR estimate, a slight discount to historical average of 13x given slowing recovery, China macro and lower free cash flow conversion due to the concession capital expenditures,” Kelley said.
Caesars Entertainment has a $35 price outlook. The stock closed at $29.83 on Tuesday and is down $2.76 for the year.
“Our $35 PO is based on approximately 7x 2025 EBITDAR,” Kelley said. “This multiple is slightly below Caesars’s long-term historical average and mid-cycle multiple.”
Boyd Gaming has a $95 price target. The stock closed at $81.58 on Tuesday and is up $9.75 for the year.
“Our $95 PO is based on approximately 7.5x 2026 EV/EBITDAR,” Kelley said. “Our valuation multiple is in line with the historical multiple range for regional gaming companies of 5-12x.”
Churchill Downs has a price target of $115. It closed Tuesday at $104.20 and is down $27.39 for the year.
“Our $115 PO is based on approximately 11x 2025E EBITDA,” Kelley said. “This is a slight premium to both Churchill Downs’s historic average valuation and domestic gaming peers which we view as warranted given the one-of-a-kind and irreplaceable nature of the Kentucky Derby and an established, unique, and profitable online growth platform in TwinSpires and Exacta.”
DraftKings has a price target of $50. It closed Tuesday at $43.80 and is up $7.51 for the year.
“Our $50 PO is based on approximately 19x 2026E Adjusted EBITDA, a premium to other proven best-of-breed disruptors,” Kelley said. “We believe that this premium multiple is justified given the early-stage enthusiasm for the vertical and the scarcity value associated with DraftKings as well as its revenue trajectory and inflection to positive Adjusted EBITDA.”
Penn Entertainment has a price target of $20. It closed Tuesday at $17.34 and is down $1.50 for the year.
“Our $20 price objective is based on approximately 7x 2025 EBITDAR, in line with Penn’s historical average,” Kelley said. “We view this multiple as appropriate given normalizing same-store-sales in regional gaming and moving past peak losses in interactive.”
