Earnings season for the gaming industry kicks off Wednesday when Las Vegas Sands reports its first-quarter results, with one analyst warning about deterioration in Las Vegas, deceleration in regional casinos, and stalling in Macau.
Monarch Casino & Resort reported its Q1 earnings Tuesday, but no call was held.
Sands, which traditionally kicks off the earnings season for the industry, will be followed by Churchill Downs’s and Boyd Gaming’s calls on Thursday, and Gaming and Leisure Properties on Friday after releasing numbers Thursday. Next week, Caesars Entertainment will talk with analysts on Tuesday, followed by MGM Resorts and Rush Street Interactive on Wednesday. VICI will hold its earnings call on May 1 with financials released the day before. Red Rock Resorts also holds an earnings call May 1. Wynn Entertainment is scheduled for May 6.
Light & Wonder and Flutter will release their first-quarter earnings on May 7, followed on May 8 by Penn Entertainment, Full House, and Golden Entertainment. IGT will hold its earnings call on May 13.
Morgan Stanley in a first-quarter preview note to investors said said that brick-and-mortar casino trends weakened from a strong fourth quarter. Digital handle remained stable.
Among the takeaways in the note, high-frequency data across gaming slowed during the first quarter, with both the Strip and locals properties “showing signs of deterioration,” while regional casinos are showing signs of deceleration and Macau is stalling, according to analyst Stephen Grambling.
“Gaming stocks have performed poorly over the past 30 days going into earnings amidst growing consumer spending concerns and potential share of wallet shifts to goods versus services,” Grambling said. “Our gaming stock coverage is -9% vs. S&P 500 -4%, with individual performance ranging from +14% to 25% versus the S&P 500 -4% (with Las Vegas Sands the worst). Despite the improved valuation and lower sentiment, we believe multiples could stay compressed near term with further misses and a challenging environment to transact. Interestingly, enterprise values for about 30% of our coverage are now below pandemic lows in June 2020, amid extraordinarily heightened health fears.”
Gaming has been under substantial pressure, even after the stocks were at lower valuation, Grambling said. He attributed this greater pressure to the increased operating leverage of the business models after sale-leasebacks of real estate now facing fixed expenses for rent, debt, and capital expenditures.
Looking back at 2001 and 2008-2009, the Las Vegas Strip saw 7% and 21% declines in gaming revenue (with EBITDA down 2 times revenue), Grambling said. The regional casinos were more resilient than the Strip, seeing gaming revenue per position flat and -5% in 2001 and 2008-09, respectively.
“Looking forward, margins are still well above historical levels, operators have pivoted to be more lease-heavy, customers have skewed more high end on the Strip, and regional casinos face a new alternative with igaming in several markets,” Grambling said. “As such, cyclicality could be amplified in a future downturn.”
Deutsche Bank has trimmed its first quarter of 2025, full-year 2025, and 2026 Macau forecasts on lower market growth and more subdued market share expansion. Their updated Macau property EBITDA forecasts are 13% below consensus for the first quarter of 2025, 8% below for 2025, and 6% below for 2026.
“We believe these forecasts, while assuming some market share expansion, are appropriate given the potential variance that exists at present, and with shares at what we deem to be very inexpensive levels,” said analyst Carlo Santarelli.
As for Sands, whose stock closed at $33.94 on Tuesday, down from a 52-week high of $52.61, has a $59 price target from Deutsche Bank.
“We see little reason for heroic forecasts at current valuation levels, as shares remain inexpensive, even on the well-below-consensus revisions we present in this note,” Santatelli said. “In order for LVS shares to work, we believe some combination of the following is needed: an acceleration in Macau market gaming revenue performance; a stabilization and acceleration in LVS Macau market share in the second quarter of 2025 and beyond; a cooling geopolitical environment; and a change in sentiment around the macroeconomic picture in China.”
Santarelli said they believe these items, when coupled with a consensus outlook that appears achievable, “would set LVS up well to work as an inexpensive, beat and raise story as we move through 2025. We find the current setup to be challenging, given the spectre of negative revisions at present.”
