Las Vegas locals casinos will prove stable and solid in second-quarter earnings. That was the prediction of Truist Securities analyst Barry Jonas in a July 16 investor note.
Consumer softness had yet to manifest itself, Jonas reported, and tariff stress was largely in the rear-view mirror. All United States gaming sectors appeared positive, except for Las Vegas, which “appears to be in a choppy summer.”
However, Jonas said he liked the Vegas-locals market, upgrading Station Casinos to a Buy rating and “expecting a strong Q2 beat with a potentially positive tone suggesting more upside ahead.” However, softness at the Strat and the lack of merger activity sent Golden Entertainment into the Hold column.
Across gaming, Jonas cited Churchill Downs and Station for quality of assets, Vici Properties and Gaming & Leisure Properties for stability of cash flow.
Jonas expected Station and Boyd Gaming to beat their cash-flow targets by five percent and four percent, respectively. He pointed to a two percent uptick in second-quarter locals-gambling revenue, although he expected Golden to miss its cash-flow forecast by four percent.
Particular praise was lavished on Station, whose upside was seen as having more room to shine. Jonas wrote that the locals “market appears to be very well positioned amidst favorable population trends and [Station] is benefiting more than we expected given a continued flight to quality. As former Vegas local residents, we have always viewed [Station] as holding some of the best-in-class properties.”
He also expected a revenue boost of as much as $85 million from the rescinding of taxes on tips. Construction disruption, Jonas added, was less than anticipated, with North Fork Rancheria and sundry Vegas projects providing future cash spigots. He repriced his target for the stock to $67 per share, up from $45 apiece.
The lack of construction upset “likely speaks to better than expected market demand, as well as better yielding of existing gaming product offsetting any temporary reduced capacity,” to Jonas’s mind. He also noted that Station’s room rates were up as much as 25 percent at Durango Resort and Green Valley Ranch and almost 10 percent higher at Red Rock Resort.
With leverage from the Durango build dropping from 4.1 times cash flow to 3.4 times, Jonas saw expansion of the new resort as a likely prospect. He also felt that Inspirada (“located in the highest-net-worth area in Nevada”) and Cactus Lane, just south of South Point, were likely in the development queue. Management was also reported to be keeping $300 million in reserve for opportunistic share repurchases.
As for rival Golden, weakness at the Strat was said to be too much for the company to offset with its off-Strip performance. The company was also exposed to low-end players, the weakest sector of the consumer spectrum at present.
Nor was Golden’s tavern business providing the expected buttress. Competitors were, Jonas chronicled, spending twice as much on free-play promotions. Golden “plans to stay disciplined in its Tavern strategy, remaining vulnerable to the current promotional environment.”
Failing to see anything imminent in Golden’s sale-or-purchase pipeline, Jonas predicted that any asset sales would fall to the low end of the scale, “given where interest rates sit today.” He predicted aggressive share repurchases instead.
June saw a flattening of the upward trend in gambling grosses following the “Liberation Day” shock. Although tariffs had caused a pause in some Churchill Downs construction, the analyst thought it would be resumed soon. He added, “We think the regional [industry] could be seeing some trade-down benefits (local trip vs. vacation) and overall less international exposure.”
Jonas revealed that Churchill Downs had paid $180 million for newly obtained Casino Salem in New Hampshire, ending a competitive menace to its nearby Chaser’s Poker room. “The state also just legalized Class 3 gaming and removed other limits, suggesting upside for the market overall,” he added.
Soft low-end business continued to be the bane of Las Vegas, compounded by seasonality concerns and a lack of convention trade. With a major Jewish holiday shifted into the fourth quarter of 2025, operators expected second-quarter softness to continue into the third trimester.
“While summer weakness is well understood by investors, the bigger question is whether this reverses in Q4,” Jonas wrote. Operators were pinning their hopes on 2026, with its easier comparisons and return of the Con/Agg expo. “With valuation and expectations fairly undemanding,” the Truist analyst stuck by his Buy ratings on Caesars Entertainment and MGM Resorts International.
Digitally, hold and handle alike had improved. “This should (for now) silence some fears that sports betting was ‘broken’ following a brutal Q4 (NFL) and Q1/early Q2,” Jonas wrote. He expected both DraftKings and FanDuel parent Flutter Entertainment to beat forecasts, “but admittedly, the outlook is more uncertain, given rising tax rates, more legislative noise, and prediction market uncertainty.”
Nor has the digital sector heard the last of tax increases, coming off hikes in Illinois, New Jersey, and Louisiana, plus the removal of promotional tax deductions in Colorado. The latter phenomenon was seen as coming to Maryland and Pennsylvania as well.
Jonas noted, “Our legislative expert Brendan Bussmann of B Global currently sees Pennsylvania removing promo deductibility as taking a back seat to taxing/regulating skill based games. Bottom line, given the fallout from the ‘Big Beautiful Bill’, we think other states that haven’t considered higher taxes or promo-deduction removal could do so before the eventual (inevitable?) step to igaming, in our view.”
Real estate investment trusts (REITs) such as Vici and GLPI were demonstrating continued creativity, Jonas reported. But the merger-and-acquisition climate continued to present a challenge.
Relative weakness at GLPI was attributed to delays and uncertainty surrounding in-progress Bally’s Chicago, of which the REIT had taken charge. Jonas thought Bally’s recent $2.7 billion asset sale to Intralot would improve its credit worthiness. “In a scenario where BALY has to exit the Chicago project, we think there would be other operators willing to step in with GLPI able to complete the project on its own in the meantime.”
While privately held manufacturers “settle in,” Jonas predicted Light & Wonder would continue to gain market share. He particularly liked Light & Wonder’s new target of $2 billion cash flow by 2028, “which we think is achievable after factoring the recent Grover [Gaming] acquisition and organic growth across all operating segments.”
In closing, Jonas turned to Brightstar Lottery, where he said a higher-than-expected tender for the Italian lottery (€2.2 billion) was offset by more-aggressive-than-anticipated share repurchases ($500 million) and special dividends ($600 million). But, he said, “we think investors are waiting for the next operating-growth catalyst while seeking reassurances around the businesses resistance to macro softness.”
In a parallel investor note, Jefferies Equity Research analyst David Katz largely agreed with Jonas’s findings vis-a-vis Vegas, saying, “We believe most of the bad news is already baked into shares.” He predicted a “grind-y summer” for Strip operators. “Construction across the Strip may also dampen near-term results, but a strong group/entertainment slate is positioning Vegas for a strong 4Q and FY26.”
Like Jonas, Katz favored Caesars. However, he said he was taking a measured view of Station, Golden, and Monarch Casinos & Resorts, pending the disclosure of new growth avenues.
Katz applauded Boyd’s sale of its five percent stake in FanDuel. He said the $1.4 billion exit fee “more than offset the $60M of lost [cash flow] annually and the deleveraging associated with the transaction better positions the company to capitalize on growth opportunities or additional capital returns.”
Unlike Jonas, Katz also looked toward Macau and liked what he saw. Gambling grosses shot up 19 percent in June and could improve as much as 18 percent when July has been tallied.
“Hit concert series, opening/maturing of new/recently renovated properties and a recent uptick of the VIP win rate have all contributed to the growth, but in totality do not equate to high-teens growth,” wrote Katz. “The question becomes whether the market is redefining its growth trajectory”or if the revenue gains were the offshoot of promotional activity. He stayed with Buy ratings on Las Vegas Sands, Wynn Resorts, and MGM.
