CBRE is lowering its Las Vegas Strip earnings’ estimates for Caesars Entertainment and MGM Resorts International in 2026.
John DeCree, director of equity research at CBRE, said his team recently met with several Las Vegas casino operators and toured a number of properties. The focus of their conversations was around the state of the Strip amidst the summer slowdown and the recent gaming revenue revival in regional markets.
“The Strip has had a slow summer, with visitation declines pressuring occupancy and average daily rates, particularly in midweek at mid-to-lower-end properties,” DeCree said in a note to investors. “We view the visitation decline primarily as a return to more typical seasonality; however, this is also exacerbated by negative geopolitical sentiment from Canada and Mexico, immigration-control concerns from Southern California, and reduced flight capacity from Spirit Airlines. The return of summer seasonality might be here to stay and these visitation headwinds could persist into fiscal year 2026.”
As a result, DeCree is lowering Las Vegas Strip estimates for Caesars and MGM. He added, however, that the current valuation of MGM and Caesars “more than reflects these headwinds and we remain comfortable with the underlying core Vegas Strip gaming customer and the group and convention outlook for fiscal year 2026.”
The Las Vegas locals market continues to perform well, without any discernible impact from Strip trends, DeCree wrote. The broader Las Vegas economy is more diversified and less reliant on the Strip than in prior cycles.
“The locals market also benefits from a more favorable supply/demand balance with fewer gaming positions and a much larger population base,” DeCree said. “While year-over-year comparisons get increasingly difficult, the locals market should be a major beneficiary of the recent tax cuts for tipped and overtime employees, as well as seniors.”
As for regional markets, DeCree wrote that solid regional gaming revenue reports for the first half of 2025 and accelerating growth in recent summer months are encouraging. He noted that there is no clear answer to the cause or sustainability of regional tailwinds.
“Some potential drivers include easy comparisons, improved consumer sentiment on the heels of tax cuts, and meaningful capital reinvestment, all within the backdrop of steady consumer demand for in-person entertainment,” DeCree said.
CBRE said in the note that it sees “limited catalysts” for the domestic casino group in the near-term and expects valuation multiples versus earnings revisions to be the bigger driver of price action over the next 6 to 12 months.
“With this in mind, we continue to prefer the shares of Wynn Resorts (Buy, $135) in front of the company’s analyst day in the UAE, recovering gaming revenue in Macau, and relative earnings outperformance on the Las Vegas Strip. The shares of Caesars (Buy, $45) also remain deeply undervalued, particularly considering their owned real estate and the opportunity for meaningful free cash flow inflection in 2026 despite softer Vegas trends with ramping digital profitability, declining interest rates, debt paydown, lower capex, and a reduced tax burden from (federal) tax cuts.”
